Salesforce Stock Down 12% After Q4 Earnings Forecast

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Salesforce Stock Down 12% After Q4 Earnings Forecast
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Salesforce.com Inc (NYSE:CRM) stock was down 12% on Wednesday after the company’s earnings guidance for Q4 fell short of analysts’ estimates. According to the earnings report, Salesforce beat revenue and profit expectations for the third quarter.

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Adjusted Guidance

As informed by CNBC, Salesforce stock dived 12% Wednesday on unflattering earnings guidance for the fourth quarter. It is the biggest drop since March 2020 when the COVID-19 pandemic shook the markets.

The firm, however, posted better-than-expected profit and revenue for the previous quarter as it promoted Bret Taylor to the co-CEO position, alongside Marc Benioff.

“Earnings per share for the December quarter will fall between 72 and 73 cents, trailing the 81-cent average estimate, according to analysts surveyed by Refinitiv. While profit missed expectations, Salesforce raised its guidance for revenue to between $7.22 billion and $7.23 billion, about in line with estimates of $7.22 billion,” according to CNBC.

As revealed by Atlantic Equities analysts, the lukewarm Q3 results might be the cause of “management conservatism”, as the third quarter was still solid. However, “slightly disappointing guidance will give the stock a breather after a strong run over the last six months.”

Looking Into Q4

The company expects fourth-quarter revenue to grow by 24% aided by Slacks’ sales of $285 million. Salesforce acquired the communications software company for $27 billion, with the purchase being finalized in July.

Amy Weaver, Salesforce’s chief financial officer, said: “In Q4, we are expecting to see additional investments in our workforce and our growth and also some modest increased T&E expectations … And that’s going to cause a q-over-q decline in operating margin.”

Weaver added that Slack is Salesforce’s strategic cornerstone, as “During the third quarter, we again executed against the strong demand environment in front of us. Slack saw another strong quarter, and we are pleased with Slack's representation in our largest deals.”

On Taylor’s appointment, CEO Benioff said: “Together, Bret and I will lead Salesforce through our next chapter, while living our shared values of trust, customer success, innovation, and equality for all.”

Salesforce is part of the Entrepreneur Index, which tracks 60 of the largest publicly traded companies managed by their founders or their founders’ families.

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