Salesforce (CRM) - Get salesforce.com, inc. Report shares slumped lower in pre-market trading after the group forecast softer current quarter profits amid intensifying competition in the cloud and business software market and unveiled big changes to its top management team.
The forecast muddied an otherwise solid third quarter earnings report, which showed revenues rising 27% to $6.86 billion over the three months ending in October, helping deliver an adjusted bottom line of $1.27 per share.
However, Salesforce said fourth quarter profits would slow to between 72 cents and 73 cents per share, notably shy of Street forecasts, with analysts noted growing market share gains for rivals such as Google (GOOGL) - Get Alphabet Inc. Class A Report and Microsoft (MSFT) - Get Microsoft Corporation Report. Revenues over the final months of the 2022 fiscal year, which ends in January, were pegged at $26.4 billion, with a full year operating margin expected at 18.%..
"No other software company of our size and scale is really performing at this level. We know that because we're talking to other cloud CEOs every day," CEO Marc Benioff told investors on a conference call late Tuesday. "I think about how long I was waiting to get into the $20 billion in revenue for Salesforce and well, it dazzled me. Kind of like now, we're talking about beating the $30 billion and I'm kind of like -- wow, I wonder, wow, this is amazing."
Salesforce shares were marked 5.6% lower in early Wednesday trading to change hands at $26 each, a move that would trim the stock's six-month gain to around 15%.
Salesforce also unveiled plans to promote chief product officer Bret Taylor to the role of co-CEO alongside founder Benioff, as well as a place on the company's board as vice chairman.
Taylor, who was named to Twitter's board earlier this week in the wake of CEO Jack Dorsey's departure, joined Salesforce when it purchased Quip, the company he founded, in 2016 for $582 million.
"It's really an honor of a lifetime. Thank you, thanks to the board, and most importantly, thank you to our customers and trailblazers," Taylor told investors later Tuesday. "I'm honored to be a part of you in this next-chapter Salesforce."
Canaccord Genuity analyst David Hynes said the muted fourth quarter guidance seemed "at odds with management’s typically bullish commentary on pipeline, the demand environment, and early Q4 traction."
"If we step back for a moment, let’s not lose sight of the fact that Salesforce is essentially an ocean liner of digital transformation that spans go-to-market, support, commerce, communications, data and integration," he added. "There’s value in this diversification, and we chose the ocean liner descriptor intentionally – it’s hard to knock a firm like this off course (and we don’t see any icebergs floating off the coast of Hawaii)."