What happened
Shares of Salesforce (CRM 0.42%) were climbing the charts today after the cloud software giant posted strong results in its second-quarter earnings report, beating estimates on the top and bottom lines.
As of 10:16 a.m. ET on Thursday, the stock was up 4.9%.
So what
Salesforce, which is best known for customer relationship management (CRM) software, continued to report strong growth on the bottom line and delivered solid top-line growth in a challenging environment.
Revenue in the second quarter was up 11% to $8.6 billion, topping estimates at $8.52 billion,
Current remaining performance obligations (RPO), a proxy for backlog, was also solid, up 12%, showing that the earlier deceleration in revenue growth has stabilized.
More impressive was its performance on the bottom line. Generally accepted accounting principles (GAAP) operating margin jumped from 2.5% in the quarter a year ago to 17.2%, a reflection of management's cost-cutting, including a round of layoffs earlier in the year.
On the bottom line, adjusted earnings per share (EPS) nearly doubled from $1.19 to $2.12, beating expectations at $1.90.
Chief financial officer Amy Weaver said, "We continue to execute against our profitable growth framework, delivering 17.2% GAAP operating margin and 31.6% non-GAAP [adjusted] operating margin -- exceeding our target three quarters early."
Now what
Salesforce also issued strong guidance, calling for $8.7 billion to $8.72 billion in revenue for the third quarter, or 11% growth, and adjusted EPS of $2.05 to $2.06, compared to the consensus at $1.83.
For the full year, it expects revenue of $34.7 billion to $34.8 billion, or 11% growth, and adjusted EPS of $8.04 to $8.06, up from a prior forecast range of $7.41 to $7.43.
As the company had promised, it's driving strong margin expansion from cost controls earlier in the year, and it's benefiting from increased interest in artificial intelligence (AI).
At a forward P/E of 28, the stock seems to have more upside, given the growth opportunity in AI and beyond.
