Customer relationship management specialist Salesforce (CRM -0.78%) reported fiscal 2025 second-quarter financial results on Wednesday that showed solid growth across multiple metrics. Second quarter revenue of $9.33 billion rose 8% year over year and exceeded internal guidance. Earnings per share (EPS) of $1.47 also topped management expectations.
Overall, Salesforce's quarter (which ended July 31, 2024) showed notable year-over-year growth. Management also noted that Chief Financial Officer Amy Weaver plans to step down from her position. Weaver will remain CFO until a successor is appointed and will stay on as an advisor.
| Metric | Q2 FY25 | Guidance | Q2 FY24 | Change (YOY) |
|---|---|---|---|---|
| Revenue | $9.33 billion | $9.20 - $9.25 billion | $8.60 billion | 8% |
| EPS (diluted) | $1.47 | $1.31 - $1.33 | $1.28 | 15% |
| Adjusted EPS (diluted) | $2.56 | $2.34 - $2.36 | $2.12 | 21% |
| Operating cash flow | $0.89 billion | N/A | $0.81 billion | 10% |
| cRPO | $26.5 billion | N/A | $24.1 billion | 10% |
Source: Salesforce. Note: Guidance is based on management guidance provided on May 29, 2024. cRPO = Current remaining performance obligations. YOY = Year over year.
Understanding Salesforce
Founded in 1999, is widely recognized for its Customer 360 platform, which unifies various business functions under a single source of customer information. The company focuses heavily on integrating artificial intelligence (AI) into its software, offering advanced features like AI-driven analytics and predictive insights.
Recently, Salesforce intensified its focus on innovating its core platform, primarily through the launch of the Agentforce AI platform. This new AI-centric platform aims to reimagine enterprise software, making it more efficient and productive.
Quarterly Highlights
Revenue Growth and Margin Expansion: Total revenue of $9.3 billion was distributed in the Americas region ($6.2 billion, up 8%), Europe ($2.2 billion, up 11%), and Asia Pacific ($940 million, up 16%), highlighting diversified geographical growth, especially in the Asia Pacific region. The consistent revenue contributions across regions highlight the effectiveness of Salesforce's expansion strategies.
GAAP operating margin improved to 19.1% from 17.2% in fiscal 2024's Q2. Non-GAAP operating margin also improved, now sitting at 33.7% compared to 31.6% the previous year. Increased operational efficiency and cost management were major contributors to this expansion.
AI and Customer 360 Platform: Salesforce continues to advance its AI capabilities, exemplified by the launch of the Agentforce AI platform. This new feature aims at simplifying and automating customer interactions by integrating AI into various enterprise software components. CEO Marc Benioff stated, "With our new Agentforce AI platform, we are reimagining enterprise software for a new world where humans with autonomous Agents drive customer success together."
Key Metrics and Guidance: Salesforce's current remaining performance obligation (cRPO) grew 10% year over year, standing at $26.5 billion. Operating cash flow increased to $0.89 billion from $0.81 billion in fiscal 2024.
The full-year fiscal 2025 revenue guidance remains between $37.7 billion and $38.0 billion, representing 8% to 9% growth. Management adjusted the GAAP operating margin guidance to 19.7%, down from 19.9%, and raised the non-GAAP operating margin to 32.8%, up from 32.5%. GAAP diluted EPS guidance was slightly adjusted to $6.05-$6.13 from $6.04-$6.12, and non-GAAP diluted EPS was raised to $10.03-$10.11, from $9.86-$9.94. The adjustments indicate Salesforce is focusing on more effective cost management and operational efficiency.
Dividends and Share Repurchase Programs: repurchased shares worth $2.13 billion and paid out totaling $0.40 per share, reflecting its commitment to returning capital to shareholders. Outgoing CFO Amy Weaver remarked, "Our capital return program remains a priority, and we now expect to more than fully offset our dilution from FY25 stock-based compensation."
Looking Ahead
Salesforce's revenue guidance for fiscal 2025's Q3 stands between $9.31 billion to $9.36 billion, indicating a 7% year-over-year growth at the midpoint. This suggests a slight deceleration compared to the 8% growth achieved in Q2 but maintains steady growth momentum. The company continues to emphasize AI and Customer 360 integration as key growth drivers.
Management remains optimistic about Salesforce's strategic positioning and future growth. Moving forward, investors should closely monitor Salesforce's AI advancements and its ability to sustain revenue growth amidst competitive pressures.
