Salesforce turned a loss into a profit in the fourth quarter, but its performance guidance fell short of expectations, causing the stock price to plummet by 7% at one point.
Salesforce's revenue and profits for the fourth quarter exceeded Wall Street expectations, but the full-year revenue guidance for the fiscal year 2025 fell short of expectations and did not incorporate the impact of artificial intelligence into the guidance.
Salesforce, the cloud computing service giant, turned losses into profits in the fourth quarter, with both revenue and profits exceeding Wall Street expectations. However, due to the guidance for the current fiscal year falling short of expectations, the company's stock price dropped by 7% in after-hours trading.
On Wednesday local time, Salesforce announced in its financial report that for the fourth quarter ending on January 31, 2024, the company's revenue increased by 10.8% year-on-year to $9.29 billion, surpassing analysts' expectations of $9.22 billion.
In the fourth quarter, Salesforce's net profit was $1.45 billion, better than the analysts' forecast of $1.26 billion, with diluted earnings per share of $1.47, also exceeding the expected $1.29 per share. In the same period last year, the company had a net loss of $98 million, or a diluted loss of 10 cents per share.
"I am pleased to say that there has been an improvement in booking growth over the past two quarters," said Salesforce CFO Amy Weaver during a conference call with analysts.
However, the future performance guidance is not optimistic.
Salesforce expects revenue for the first quarter of the 2025 fiscal year to be between $91.2 billion and $91.7 billion, basically in line with analysts' expectations of $91.6 billion.
The full-year revenue for the 2025 fiscal year is projected to be between $37.7 billion and $38 billion, a 9% increase from the 2024 fiscal year, but below analysts' expectations of $38.62 billion.
Weaver stated that the full-year guidance takes into account foreign exchange pressures and the continued weakness in professional services. The financial report shows that revenue from the professional services department in the fourth quarter decreased by 9% year-on-year.
Salesforce President and COO Brian Millham mentioned that although there is a high demand for AI products, the guidance did not factor in the significant impact of artificial intelligence.
However, he noted that over time, the internal adoption of AI technology within the company should help improve profit margins.
This quarter, Salesforce announced the acquisition of software startup Spiff under undisclosed terms and will begin selling its products on Amazon Web Services (AWS).