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Salesforce shares spike on blockbuster results

 

Thursday, August 31, 2023

Today’s headlines

What’s happening: Shares of Salesforce edged higher in after-hours trading on Wednesday, following the release of the company’s quarterly results.

What happened: The cloud-based enterprise software giant reported better-than-expected results for its second quarter on Wednesday.

Salesforce also boosted its revenue outlook for the year, amid resilient demand for its enterprise software offerings.

How were the results: The San Francisco, California-based company reported a double-digit increase in its top-line for the fiscal second quarter ended July 31.

  • Revenues grew by 11% year-over-year to $8.6 billion, topping the consensus estimates of $8.52 billion.
  • Adjusted earnings came in at $2.12 per share, beating Wall Street expectations of $1.90 per share.

Why it matters: Salesforce recently announced its first price hike in seven years, increasing prices of its major offerings by an average of 9%. The company also looked to increase demand by integrating AI into its offerings.

The company’s cash flow from operations surged 142% year-over-year, while free cash flow jumped 379%. Non-GAAP operating margins widened to 31.6% in the quarter, versus 27.6% a quarter ago.

“Based on our performance and what we see in the back half of the year, we’re raising our fiscal year ‘24 revenue, operating margin, and operating cash flow growth guidance,” CEO Marc Benioff said during the earnings call.

Management guided to third-quarter revenues between $8.7 billion and $8.72 billion, higher than market expectations of $8.66 billion. The company also projected adjusted earnings of $2.05 to $2.06 per share, versus market views of $1.83 per share.

Salesforce raised its revenue guidance from between $34.5 billion and $34.7 billion to a range of $34.7 billion to $34.8 billion. The company also lifted its adjusted operating margin projection from 28% to 30% and guided to full-year adjusted earnings of $8.04 to $8.06 per share.

How shares responded: Salesforce’s shares jumped 5.6% to $227.10 in extended trading on Wednesday, after the company released results for its second quarter. The stock has added around 29% over the past six months.

What to watch: Investors will continue monitoring the overall rebound in technology spending by companies. Markets will also watch Salesforce’s launch of new AI software tools and how these are received by clients.

The markets today

The Canadian dollar will be in focus today, ahead of a basket of economic reports

Context: The CAD/USD forex pair moved higher on Wednesday, amid higher crude prices.

Details: Prices for crude oil, one of Canada’s major exports, strengthened on Wednesday, providing support to the loonie. WTI crude oil for October delivery gained 47 cents to close at $81.63 per barrel on Wednesday.

Weakness in the US also boosted the CAD/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.4% to 103.16 on Wednesday, after declining as low as 102.92 earlier in the session.

The CAD/USD forex pair added around 0.1% to 1.3534 on Wednesday. The S&P/TSX Composite index rose 0.2% to close at 20,330.32, extending gains for the fourth session in a row.

What to watch: Traders await the release of economic data on CFIB business barometer, current account and average weekly earnings from Canada today. Canada’s CFIB Business Barometer long-term optimism index, which rose by 0.2 points to 54.2 in July, is expected to decline to 53.8 in August.

Analysts expect Canada to report a wider current account deficit of C$9 billion in the second quarter, versus C$6.2 billion in the first quarter. Average weekly earnings of non-farm payroll employees, which rose 3.6% year-over-year to $1,201 in May, is projected to rise 3.4% in June.

Other Markets: US trading indices closed higher on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.11%, 0.38% and 0.56%, respectively.

The news shaping the markets

The US issued a warning to North Korea against selling weapons to Russia for its war against Ukraine. Despite continued geopolitical tensions, the safe-haven US dollar index dipped slightly this morning.


Australia’s plant machinery capex unexpectedly rose by 1.9% during the three months to June, which lent support to the AUD/USD forex pair.


China’s official NBS non-manufacturing PMI fell to 51.0 in August, from 51.5 in the prior month, and sent the CNY/USD pair lower in forex trading this morning.


New Zealand’s ANZ Business Outlook Index rose to -3.7 in August, from -13.1 a month ago, lending support to the NZD/USD forex pair.


Japan’s retail sales climbed 6.8% year-over-year in July, topping market expectations of 5.4% growth, which sent the JPY/USD pair higher in forex trading this morning.

What else to watch today

Germany’s retail sales, number of unemployed people, unemployment change and unemployment rate, France’s inflation rate, gross domestic product and producer prices, Turkey’s GDP growth rate, foreign exchange reserves and MPC meeting summary, Spain’s current account and consumer confidence indicator, Eurozone’s consumer price inflation rate and unemployment rate, Italy’s inflation rate, South Africa’s producer price inflation and balance of trade, Brazil’s unemployment rate and government budget value, US Challenger job cuts, personal income, personal spending, personal consumption expenditure price index, initial jobless claims, continuing jobless claims, Chicago business barometer and natural gas stocks change, India’s GDP growth rate, infrastructure output and central government budget value, Mexico’s unemployment rate, Argentina’s consumer confidence indicator, as well as Russia’s money supply M2.


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