Salesforce (NYSE: CRM) saw its stock rise by over 12% in after-hours trading on December 3, 2024, following the company’s announcement of strong quarterly results and an optimistic outlook for the future, Forbes reports.
The company reported a revenue of $9.4 billion for the third quarter of its fiscal year, beating analyst estimates of $9.3 billion, although adjusted earnings of $2.41 per share slightly missed expectations of $2.44 per share.
Salesforce’s quarterly performance highlighted several key positives. The company achieved 8% year-over-year revenue growth, driven by a 9% increase in its subscription and support sales, which totaled $8.9 billion. Furthermore, the company’s current remaining performance obligations—representing future revenue under contracts—stood at $26.4 billion, marking a 30% increase year-over-year and surpassing analyst projections.
A significant contributor to Salesforce’s success is its AI system, Agentforce, which is being integrated across the company’s offerings. This adoption of AI technology has helped fuel both increased revenue and the company’s expanding customer base.
In terms of profitability, Salesforce saw a 190 basis point year-over-year increase in its adjusted operating margin, rising to 33.1%. This boost in both revenue and operating margin helped the company deliver adjusted earnings of $2.41 per share, reflecting a 14% increase compared to the same quarter in the previous year.
Looking ahead, Salesforce expects its fourth-quarter revenue to increase by 7-9%, with earnings projected to fall between $2.57 and $2.62 per share on an adjusted basis.
Despite a volatile history, Salesforce’s stock has performed well in 2024, gaining 40% year-to-date, outpacing the broader market, as the S&P 500 index has increased by 26% this year. However, Salesforce’s stock has shown significant fluctuation in recent years, with returns varying widely from a 14% gain in 2021 to a 48% loss in 2022, followed by a 98% surge in 2023.
From a valuation standpoint, analysts estimate Salesforce’s stock to be worth $390 per share, based on a price-to-earnings ratio of 33x for the fiscal year 2026. This suggests that while there may be limited room for further growth in the near term, the company’s ongoing AI developments, strong revenue growth, and shareholder returns via stock repurchases—nearly $8 billion spent on share buybacks so far in 2024—could help support its long-term prospects.
