Investing.com -- Salesforce (NYSE:CRM) lifted annual guidance after reporting second-quarter results that topped Wall Street estimates as the software company touted improved demand for the second half of the year.
Shares gained nearly 6% in pre-market Thursday trade following the report.
Salesforce.com reported adjusted EPS of $2.12 on revenue of $8.60 billion. Analysts polled by Investing.com anticipated EPS of $1.9 on revenue of $8.53B.
Subscription and support revenues for the quarter were $8.60B, an increase of 11% year-over-year. Professional services and other revenues for the quarter were $600M, an increase of 3% year-over-year.
Adjusted operating margin was 31.6%, which means that Salesforce hit its profitability target three quarters earlier than initially planned.
Looking ahead, the company lifted its annual guidance, as demand and margins are expected to improve in the back half of the year.
For the full-year 2024, adjusted EPS was guided in a range of $8.04 to $8.06, up from $7.41 to $7.43 previously. While revenue was guided in a range of $34.7B to $34.8B, up from a prior estimate of $34.5B to $34.7B. That topped analyst estimates for annual EPS of $7.45 on revenue of $34.65B.
Operating margin and operating cash flow growth were raised to 13.3% and a range of 22% to 23%, respectively. That compared with a prior estimate for margins of 11.4% and operating cash flow growth of 16% to 17%.
Third-quarter adjusted EPS was expected in a range of $2.05 to $2.06 on revenue of between $8.70B and $8.72B, topping Wall Street estimates of $1.82 and $8.67B, respectively.
Wolfe Research analysts commented:
"Given the "mission accomplished early" feel around margins, and the commentary around 30% being a floor not a ceiling, we are raising our margin assumptions, but with valuations now at >20x CY24 FCF, we would rather wait on the sidelines until we get conviction around double-digit top-line growth."
Goldman Sachs analysts added that the reported results will ease "some investor concern around Salesforce’s ability to balance top-line and OM expansion."
"[This] can lead the stock to re-rate higher, similar toMicrosoft, Adobe, Intuit and Autodesk, whose valuation multiples all re-rated significantly higher after embarking on a similar journey," they wrote in a note.
Additional reporting by Senad Karaahmetovic