Salesforce Expands Stock Buyback Program Despite Revenue Forecast

Stock Market02/28/2024Mr. SmithMr. Smith
1 Salesfoce
Salesforce Inc.

Key Points

  • Salesforce expands its stock buyback program by $10 billion and introduces a new dividend.
  • The company's annual revenue forecast for 2025 falls below analyst estimates, leading to a 2% decline in after-hours trading.
  • Warnings of a slowing economy prompt Salesforce to cut 700 jobs, reflecting broader layoffs across the tech industry.

Salesforce announced the expansion of its stock buyback program by $10 billion and the initiation of a new dividend. However, despite these moves, the company's shares dipped approximately 2% in after-hours trading following a revenue forecast for the upcoming year that fell below analysts' estimates.

The downbeat forecast from Salesforce suggests a potential slowdown in cloud and tech spending, attributed to clients grappling with high interest rates and increasing inflation, leading them to adopt cost-saving measures.

For the full-year 2025, Salesforce anticipates revenue ranging between $37.7 billion to $38 billion, falling short of analysts' expectations of $38.62 billion, as reported by LSEG data.

Concerns about a sluggish economy prompted Salesforce to reduce its workforce by approximately 700 employees, representing about 1% of its global workforce, in the previous month. This move aligns with a series of layoffs observed across the tech and media sectors.

"Salesforce is guiding for only 8-9% growth (for the full year), which moves it out of the high growth category. In order to make up for that, it is introducing a dividend, which is appropriate for the lower level of growth," said Gil Luria, analyst at D.A. Davidson.

Cloud data analytics company Snowflake also projected first-quarter revenue below estimates, contributing to the challenges faced by cloud firms amid uncertainty in the current economic landscape.

Despite the revenue forecast setback, Salesforce exceeded fourth-quarter revenue and profit estimates, benefiting from increased cloud spending. The company reported revenue of $9.29 billion for the quarter ended Jan. 31, surpassing analysts' expectations.

On an adjusted basis, Salesforce earned $2.29 per share, compared with estimates of $2.26 per share.

In early 2023, Salesforce attracted activist investors seeking changes, resulting in cost reductions, expanded share buybacks, and restructuring of its mergers and acquisitions strategy.

Looking ahead, Salesforce expects adjusted profit between $9.68 to $9.76 per share for the full-year, exceeding analyst estimates of $9.57 per share.

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