Despite rising interest rates weighing on the economy and stock market, we found that the mood on customer demand at Dreamforce — Salesforce’s big annual developer conference in San Francisco — was generally positive.
Executives at Salesforce, in particular, were overjoyed.
“CFOs have a lot of power right now,” Salesforce co-CEO Bret Taylor told Yahoo Finance Live. “People are focused not only on top-line growth, as they have been in recent years, but also on bottom-line growth. … It’s obviously a more measured environment, but I think technology is the solution.”
Salesforce put its money where its mouth is at the conference, pledging a 25% operating margin by calendar year 2025. This is the first time Salesforce has committed to a public operating margin goal — if hit, it would increase significant on the 2022 target there. of 20.4%.
The company also sees sales hitting $50 billion by 2025, compared to Wall Street estimates for this year of $31 billion.
All of this caught the attention of Goldman Sachs software analyst Kash Ranga, who was on the ground at the Dreamforce meeting with Salesforce customers.
Rangan is out next Thursday with one of the most bullish calls on Salesforce on Wall Street:
Where Rangan heads on Salesforce overall:
“The co-CEO structure under Marc Benioff and Bret Taylor seems to be working well and the management team as a whole seems to be united in their strategy to balance growth and profitability. % The broadest way is that digital transformation remains at the forefront for customers at its annual Dreamforce user conference, which has more than 40K paid attendees.Recently promoted President and COO Brian Millham made a positive point about the pipeline of potential business continues to look very positive.”
Rangan added that “Salesforce continues to invest in organic innovation such as the release of Genie, a real-time customer data platform. Overall, Salesforce ranks high in Goldman Sachs’ framework for investing in software.”
Inside Salesforce positive long-term guidance:
“As Salesforce enters some operating leverage in their model to index this profitability, we see that this could re-rate multiple company valuations longer term, as has been the case with Microsoft, Adobe, AutoDesk and Intuit. We were greatly encouraged by CFO Amy Weaver’s commitment to this goal, even if the company decides to participate in M&A. We point out that Salesforce has been able to show margin expansion over the past twelve months, despite the Slack integration, while reaffirming its FY23 margin targets despite a flat top line. as evidence of its ability to meet these long-term goals.”
The Goldman analyst said “while the path to this level of profitability is unlikely to be linear given the necessary go-to-market and product investments, we are comfortable with the end that this guidance suggests for its outlook for fiscal year 2023 for 20.4%. margins.”
See the performance of acquired assets Slack, Mulesoft, and Tableau:
“We highlight that Salesforce is able to drive innovation and growth through its acquired assets. We see more potential for growth driven by Slack, which was acquired at a revenue multiple of 27x ($1.1 billion) and today has grown 1.4 x to ~$1.5 billion). We believe this is still in the early stages of product adoption and innovation within the Salesforce ecosystem, and key new features were announced just this week (more below). potential from acquisitions.”
Brian Sozzi is an editor in general and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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