On Thursday, all eyes were on Salesforce (NYSE:CRM) as the cloud computing software leader announced robust fourth-quarter results and offered guidance for fiscal 2025. This performance has led many in Wall Street to declare this as the heralding of "the year of the data cloud.
Shares rose fractionally in premarket trading.
Baird analyst Rob Oliver noted a strong demand for Salesforce's Data Cloud offering, which is nearing $400 million in annual recurring revenue, a nearly 90% year-over-year increase. Despite a challenging macro environment, Oliver sees promising trends in AI and data that could drive upside this year.
He reiterated his Outperform rating and raised his price target to $355 from $310. Stifel analyst J. Parker Lane also expressed optimism, suggesting that 2024 could be the "year of the data cloud." He maintained his Buy rating on Salesforce and raised his price target to $350 from $330.
Salesforce expects sales in the next fiscal year to range between $37.7 billion and $38 billion, slightly below analysts' forecasts of $38.65 billion. However, full-year earnings are projected to be between $9.68 and $9.76 per share, surpassing the estimated $9.61 per share.
Fourth-quarter strength, first dividend
For the period ending January 31, Salesforce reported adjusted earnings of $2.29 per share, with revenue increasing by 11% year-over-year to $9.29 billion. Subscription and support revenue grew by 12% year-over-year to $8.75 billion, while service revenue was $2.16 billion.
Platform and other revenue totaled $1.72 billion, and marketing and commerce revenue saw an 8.2% year-over-year increase to $1.287 billion. Analysts had expected the Dow 30 component to earn $2.27 per share on revenue of $9.22 billion.
Additionally, Salesforce announced its first-ever quarterly dividend of $0.40 per share and increased its share buyback program by $10 billion. The company returned $1.7 billion to shareholders in the fourth quarter through buybacks.
'AI on the doorstep'
Salesforce seems well-positioned to capitalize on monetizing artificial intelligence, particularly through its Einstein offering, which some Wall Street analysts believe could significantly increase sales.
Wedbush Securities analyst Dan Ives expressed confidence in AI as a significant opportunity for Salesforce, predicting it could boost overall revenue by over $4 billion annually by 2025. He maintained his Outperform rating and $325 price target. Additionally, Stifel analyst J. Parker Lane also shared optimism about Salesforce's AI revenue potential in the near term.
Lane pointed out that Einstein's contributions in the current guidance are limited, suggesting that early adoption could lead to upside potential beyond the projected high single-digit growth. He expressed confidence in Salesforce's position in the emerging AI landscape, anticipating that the company's early investments in developing AI-powered solutions and models will start yielding results as soon as fiscal year 2025.
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