Sales will be as much as $7.83 billion in the period ending in October, the San Francisco-based company said Wednesday in a statement. Analysts, on average, expected $8.05 billion, according to data compiled by Bloomberg. For the full year, the company slightly cut its revenue forecast to $31 billion from $31.8 billion.
The lowered guidance reflected a change in customer tone as the quarter progressed, which hit particularly hard in July, Mike Spencer, recently appointed head of investor relations, said in an interview.
Co-Chief Executive Officer Bret Taylor said the company faces a “more measured purchasing environment.”
Salesforce, the leader in cloud-based customer management software, has a wide variety of clients across industries. It has maintained high revenue growth through the pandemic and expanded its business productivity products with the $27.7 billion purchase of messaging platform Slack, which was completed in July 2021. However, this year, it has tried to curb some costs, including slower acquisition speeds and reduced travel. Earlier this month, the company appointed Brian Millham as chief operating officer, filling a role left vacant since Taylor was promoted to co-CEO about nine months ago.
There are many software peers such as ServiceNow Inc. has seen clients lengthen their buying cycles as the economy has weakened in recent months, and Salesforce is likely to have experienced the same dynamic, Keith Bachman, an analyst at BMO Capital, wrote in a note before the earnings.
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Spencer said the company is seeing “longer deal cycles,” from its customers. “We’re seeing additional approvers being brought into deals — CFOs are being included in deals more often than in the past,” he said.
Shares were down about 5.5% in extended trading after closing at $180.01 in New York. The stock is down 29% this year amid a broad technology rout that particularly hit software vendors.
The company also announced a $10 billion share buyback program.
The buyback could be management signaling to investors that they are aware of the company’s share price, said Anurag Rana, an analyst at Bloomberg Intelligence. “The stock has been under a lot of pressure for the last year and a half — that may have caused it,” he said in an interview with Bloomberg Television.
In the fiscal second quarter, revenue rose 22% to $7.72 billion, beating analysts’ projections. Current outstanding performance obligations — or contracted sales not yet closed, which is a measure of near-term demand — grew 15% to $21.5 billion. Profit, excluding certain items, was $1.19 a share, compared with analysts’ average estimate of $1.03.
Currency fluctuations, particularly the strength of the US dollar, caused about $50 million more in headwinds than expected in the quarter, Chief Financial Officer Amy Weaver said in a conference call. For the full year, currency fluctuations are expected to cost about $800 million in revenue, an increase of $200 million from last quarter’s estimate.
Subscription revenue generated by its platform unit, which includes Slack, gained 34% to $1.48 billion in the period ended July 31 — the biggest increase of any division. Marketing and commerce software gained 12% to $1.12 billion, which was the smallest jump of any unit. Many analysts expect a slowdown in this division due to a broader return to marketing spending.