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Salesforce Inc. shares rallied in the extended session Wednesday after the customer-relations management software giant’s earnings outlook topped Wall Street expectations two weeks ahead of its annual confab.
Salesforce CRM shares rallied more than 6% after hours, and held steadily in that range during the conference call with analysts, following a 1.5% rise to close the regular session at $215.04.
The…
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US President Joe Biden, accompanied by Speaker of the House Kevin McCarthy, Republican of California, arrives for the annual Friends of Ireland luncheon on St. Patrick’s Day at the US Capitol in Washington, DC, on March 17, 2023.
Saul Loeb | AFP | Getty Images
What the heck really did happen on Friday, when the Dow jumped 700 points on a strong jobs reading? Why such a viscerally positive reaction to an employment number that was hotter than expected? Was it because wages didn’t spike? Was it all that perfect — a Goldilocks report?
Here’s my take on Friday’s rally. Going into the debt ceiling crisis, there was a belief that House Speaker Kevin McCarthy couldn’t control his own Republican party. Senate Majority Leader Charles Schumer wasn’t much better off with the Democrats. Both had lost control of their parties to the extremists. That meant the United States would default on its debt. It seemed pretty logical.
I truly believe the extremists never believed a default would mean more than a few weeks of setbacks and more brinkmanship. Who can blame them? President Joe Biden lamely floated that he could invoke the 14th Amendment to avoid this and any future debt limit fights; the amendment includes a clause that some legal scholars say overrides the statutory borrowing limit set by Congress.
No matter what, it was pretty clear that chaos was our destiny. But when McCarthy and Biden agreed to temporarily suspend the debt ceiling and cap some federal spending in order to prevent a default, we got a deal that was even less contentious than the 2011 bargain. (The coming together brought to mind the legendary coalition of President Ronald Reagan and House Speaker Tip O’Neil in the 1980s, memorialized in Chris Matthews’ “Tip and the Gipper: When Politics Worked.”)
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Jen-Hsun Huang, president and chief executive officer of Nvidia Corp., speaks during the company’s event at Mobile World Congress Americas in Los Angeles, California, U.S., on Monday, Oct. 21, 2019.
Patrick T. Fallon | Bloomberg | Getty Images
Forget about the debt ceiling. Tech investors are in buy mode.
The Nasdaq Composite closed out its fifth-straight weekly gain on Friday, jumping 2.5% in the past five days, and is now up 24% this year, far outpacing the other major U.S. indexes. The S&P 500 is up 9.5% for the year and the Dow Jones Industrial Average is down slightly.
Excitement surrounding chipmaker Nvidia’s blowout earnings report and its leadership position in artificial intelligence technology drove this week’s rally, but investors also snapped up shares of Microsoft, Meta and Alphabet, each of which have their own AI story to tell.
And with optimism brewing that lawmakers are close to a deal to raise the debt ceiling, and that the Federal Reserve may be slowing its pace of interest rate hikes, this year’s stock market is starting to look less like 2022 and more like the tech-happy decade that preceded it.
“Being concentrated in these mega-cap tech stocks has been where to be in this market,” said Victoria Greene, chief investment officer of G Squared Private Wealth, in an interview on CNBC’s “Worldwide Exchange” Friday morning. “You cannot deny the potential in AI, you cannot deny the earnings prowess that these companies have.”
To start the year, the main theme in tech was layoffs and cost cuts. Many of the biggest companies in the industry, including Meta, Alphabet, Amazon and Microsoft, were eliminating thousands of jobs following a dismal 2022 for revenue growth and stock prices. In earnings reports, they emphasized efficiency and their ability to “do more with less,” a theme that resonates with the Wall Street crowd.
But investors have shifted their focus to AI now that companies are showcasing real-world applications of the long-hyped technology. OpenAI has exploded after releasing the chatbot ChatGPT last year, and its biggest investor, Microsoft, is embedding the core technology in as many products as it can.
Google, meanwhile, is touting its rival AI model at every opportunity, and Meta CEO Mark Zuckerberg would much rather tell shareholders about his company’s AI advancements than the company’s money-bleeding metaverse efforts.
Enter Nvidia.
The chipmaker, known best for its graphics processing units (GPUs) that power advanced video games, is riding the AI wave. The stock soared 25% this week to a record and lifted the company’s market cap to nearly $1 trillion after first-quarter earnings topped estimates.
Nvidia shares are now up 167% this year, topping all companies in the S&P 500. The next three top gainers in the index are also tech companies: Meta, Advanced Micro Devices and Salesforce.
The story for Nvidia is based on what’s coming, as its revenue in the latest quarter fell 13% from a year earlier because of a 38% drop in the gaming division. But the company’s sales forecast for the current quarter was roughly 50% higher than Wall Street estimates, and CEO Jensen Huang said Nvidia is seeing “surging demand” for its data center products.
Nvidia said cloud vendors and internet companies are buying up GPU chips and using the processors to train and deploy generative AI applications like ChatGPT.
“At this point in the cycle, I think it’s really important to not fight consensus,” said Brent Bracelin, an analyst at Piper Sandler who covers cloud and software companies, in a Friday interview on CNBC’s “Squawk on the Street.”
“The consensus is, on AI, the big get bigger,” Bracelin said. “And I think that’s going to continue to be the best way to play the AI trends.”
Microsoft, which Bracelin recommends buying, rose 4.6% this week and is now up 39% for the year. Meta gained 6.7% for the week and has more than doubled in 2023 after losing almost two-thirds of its value last year. Alphabet rose 1.5% this week, bringing its increase for the year to 41%.
One of the biggest drags on tech stocks last year was the central bank’s consistent interest rate hikes. The increases have continued into 2023, with the fed funds target range climbing to 5%-5.25% in early May. But at the last Fed meeting, some members indicated that they expected a slowdown in economic growth to remove the need for further tightening, according to minutes released on Wednesday.
Less aggressive monetary policy is seen as a bullish sign for tech and other riskier assets, which typically outperform in a more stable rate environment.
Still, some investors are concerned that the tech rally has gone too far given the vulnerabilities that remain in the economy and in government. The divided Congress is making a debt ceiling deal difficult as the Treasury Department’s June 1 deadline approaches. Republican negotiator Rep. Garret Graves of Louisiana told reporters Friday afternoon in the Capitol that, “We continue to have major issues that we have not bridged the gap on.”
Treasury Secretary Janet Yellen said later on Friday that the U.S. will likely have enough reserves to push off a potential debt default until June 5.
Alli McCartney, managing director at UBS Private Wealth Management, told CNBC’s “Squawk on the Street” on Friday that following the recent rebound in tech stocks, “it’s probably time to take some of that off the table.” She said her group has spent a lot of time looking at the venture market and where deals are happening, and they’ve noticed some clear froth.
“You’re either AI or you’re not right now,” McCartney said. “We really have to be ready to see if we don’t get a perfect debt ceiling, if we don’t get a perfect landing, what does that mean, because at these kinds of levels we are definitely pricing in the U.S. hitting the high note on everything and that seems like a terribly precarious place to be given the risks out there.”
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Microsoft CEO Satya Nadella speaks at the company’s Build developer conference in Seattle on May 7, 2018.
Grant Hindsley | Bloomberg | Getty Images
If there’s one company that has popularized artificial intelligence in the past year, it’s the small but richly funded startup OpenAI, the entity behind viral chatbot ChatGPT.
This week at its Build conference for software developers, Microsoft made extensive use of its collaboration with the startup, in which it’s invested billions.
Front and center on Tuesday, the first day of the show, was a conversation onstage between Greg Brockman, OpenAI’s co-founder and president, and Kevin Scott, Microsoft’s technology chief and the person credited with building the unusually close relationship between the two companies.
“You heard it from Greg,” Scott told the crowd assembled at the Seattle Convention Center in Washington near the end of the talk. “You all are the ones who are going to make AI great.”
Toward that end, Microsoft announced a slew of products for developers that draw on OpenAI’s technology:
OpenAI released ChatGPT to the broad world in November, sparking lots of interest from consumers. Soon after that, companies such as Atlassian, Morgan Stanley and Salesforce rushed to show off integrations of OpenAI’s GPT-4 large language model, which powers the chatbot. GPT-4 and alternatives from the likes of Amazon and Google have been trained on extensive internet data sets and have become capable of spitting out chunks of natural-sounding text.
It’s a popular form of what has come to be called generative AI, which can take human input and respond with a computer-generated output.
“Every layer of the software stack is going to be changed forever and no better place to start than the actual developer stack,” Microsoft CEO Satya Nadella said during his Build keynote on Tuesday. “We as developers, how do we build is fundamentally changing.”
It’s critical for third-party developers to keep enriching Microsoft’s own software properties, such as the Microsoft 365 productivity software bundle. Such work might help Microsoft’s Teams communication app, for example, become a more obvious hub for an increasingly wide selection of processes and tasks that companies need to carry out. That can make companies less likely to switch to alternatives such as Google Workspace.
Microsoft highlighted dozens of plugin developers on Tuesday, including Adobe, Asana, Canva, Cloudflare, Redfin, Spotify and TripAdvisor. A demonstration showed the Windows chatbot turning on a Spotify playlist, creating a company logo with Adobe Express and sending the logo to a person’s colleagues over Teams in response to a series of typed messages.
At the same time, Nadella has pushed for Microsoft to incorporate GPT-4 directly into Teams and older Microsoft products, such as the Bing search engine, often resulting in bots branded with the name Copilot. The Copilot term emphasizes collaboration with people, in contrast with (for example) the Autopilot advanced-driver assistance system for Tesla vehicles.
“We are adding Copilot into everything,” Scott Guthrie, executive vice president of Microsoft’s cloud and AI group, told CNBC in an interview last week. “It’s less of a top-down mandate, although we’re certainly pushing top-down. I think it’s something where we’ve actually evangelized internally and really got every team excited about. And we are building a common stack across Microsoft that the entire company is building on top of.”
Analysts responded favorably to the developer onslaught.
“The pace of MSFT’s GenAI innovation remains stunning to us,” Mizuho analysts with a buy rating on Microsoft stock wrote in a Wednesday note to clients.
Brockman hinted to developers that the cost of GPT-4, which runs in Azure, could come down.
“I think we did a 70% price reduction two years ago,” he told Scott. “Basically, this past year, we did a 90% cost reduction. A 10x cost drop — like, that’s crazy, right? And I think we’re going to be able to do the same thing repeatedly with new models. And so GPT-4 right now, its expensive, it’s not fully available. But that’s one of the things that i think will change.”
WATCH: Microsoft Build 2023 unveils plugins and products that incorporate A.I.
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When investors think of technology stocks, they might automatically gravitate toward “the next big thing,” or to the giant companies that dominate the S&P 500
SPX,
But Robert Stimson, chief investment officer of Oak Associates Funds, makes a case for diversification through exposure to smaller innovators which he believes are “overlooked in this environment.”
The River Oak Discovery Fund
RIVSX,
invests in tech-oriented companies with market capitalizations of $5 billion or less, with an average of about $2 billion. It has a five-star rating, the highest, from Morningstar, despite having what the investment information firm considers “above average” annual expenses of 1.19% of assets under management. The fund is ranked in the 6th percentile among 546 funds in Morningstar’s “Small Blend” category for five-year performance and in the 13th percentile among 374 funds for 10-year performance. The performance comparisons are net of expenses.
The Black Oak Emerging Technologies Fund
BOGSX,
has more of a midcap focus, with some small-cap stocks and follows a similar strategy to that of RIVSX. But with no restriction on the size of companies this fund invests in, “we don’t have to sell stocks,” Stimpson said. So long-term holdings of this fund include Apple Inc.
AAPL,
and Salesforce.com Inc.
CRM,
This fund is rated three stars within Morningstar’s “Technology” category and has a lower expense ratio of 1.03%.
Both funds are concentrated. The River Oak Discovery Fund held 34 stocks and the Black Oak Emerging Technologies Fund held 35 stocks as of March 31. Lists of both funds’ largest holdings are below.
During an Interview, Stimpson, who co-manages both funds, said that when investing in the small-cap technology space, he and colleagues identify companies that are “focused on niches.
“I want a company that knows who they are, what they do and do it well, rather than a small company trying to growing into the next Microsoft, Google or Salesforce,” he said.
More about giant companies dominating stock indexes: This twist on a traditional S&P 500 stock fund can lower your risk and still beat the market overall
Stimpson said Oak Associates pays close attention to what corporate management teams say during earnings calls and in presentations, preferring comments related to improving sales and operations with a market niche, rather than expressions of grand visions for exponential growth.
That type of narrow focus can support higher valuations over time, Stimpson said. “They have better execution, a better ability to fend-off competition and they are quality acquisition candidates.”
“ “I caution everyone that until there is revenue, earnings and a product, the hype can be more dangerous than an opportunity.” ”
All of those factors can be important to investors, considering how easily tech giants such as Microsoft Corp.
MSFT,
or Google holding company Alphabet Inc.
GOOGL,
GOOG,
can begin to compete with smaller innovative companies because they can afford to make such large investments, he said.
Simpson went further, saying that when running screens for “quality” metrics, such as improving free cash flow yields, the Oak Associates team also looks for “shareholder friendly practices.” For example, a company may be repurchasing shares. But are the buybacks lowering the share count significantly (which boosts earnings per share) or are they merely mitigating the dilution caused by the shoveling of new shares to executives as part of their compensation?
Finally, Simpson cautioned investors not to get caught up in tech-focused hype.
“When I talk to our clients, I get questions about AI and ChatGPT and how to play it. People get focused on a new great tech innovation,” he said. “You can replace ChatGPT with bitcoin, metaverse or 3-D printing.”
“I caution everyone that until there is revenue, earnings and a product, the hype can be more dangerous than an opportunity.”
These companies are held by theRiver Oak Discovery Fund and the Black Oak Emerging Technologies Fund.
Cirrus Logic Inc.
CRUS,
is the largest holding of the River Oak Discovery Fund. Stimpson calls the company “a derivative play on the success of Apple.”
“They are focused on the chips that go into mobile and [vehicles],” as well as the needs of their customers, including Apple, “rather than problem areas of the chip sector, such as memory or PCs. They are not talking about chips for AI, for example,” Stimpson said.
Cirrus focuses on systems and related software used in audio systems..
Kulicke & Soffa Industries Inc.
KLIC,
makes equipment, tools and related software used by a variety of manufacturers of computer chips and integrated electronic devices.
Stimpson likes the company as a long-term play on the worldwide disruption in semiconductor manufacturing and supply, in the wake of the Covid-19 pandemic. “All chip companies learned that any supply disruption in Southeast Asia is a problem. Over time, the opportunities for semiconductor equipment makers are very good. There will be more plants in more locations, so more equipment,” he said.
He said KLICK was in a “protected” position, with returns on equity of about 20% and free cash flow yields of about 10%.
Here are the largest 10 holdings of the River Oak Discovery Fund as of March 31:
| Company | Ticker | % of portfolio |
| Cirrus Logic Inc. |
CRUS, |
4.9% |
| Kulicke & Soffa Industries Inc. |
KLIC, |
4.6% |
| Advanced Energy Industries Inc. |
AEIS, |
4.5% |
| Cohu Inc. |
COHU, |
3.7% |
| Asbury Automotive Group Inc. |
ABG, |
3.7% |
| Korn Ferry |
KFY, |
3.6% |
| Kforce Inc. |
KFRC, |
3.4% |
| Ambarella Inc. |
AMBA, |
3.3% |
| Applied Industrial Technologies Inc. |
AIT, |
3.3% |
| Perficient Inc. |
PRFT, |
3.2% |
Click on the tickers for more about each company.
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Here are the largest 10 holdings of the Black Oak Emerging Technology Fund as of March 31:
| Company | Ticker | % of portfolio |
| Apple Inc. |
AAPL, |
5.7% |
| KLA Corp. |
KLAC, |
4.6% |
| Advanced Energy Industries Inc. |
AEIS, |
4.5% |
| Cohu Inc. |
COHU, |
4.1% |
| SolarEdge Technologies Inc. |
SEDG, |
3.9% |
| Cirrus Logic Inc. |
CRUS, |
3.9% |
| Cohu Inc. |
COHU, |
3.9% |
| Ambarella Inc. |
AMBA, |
3.4% |
| Applied Industrial Technologies Inc. |
AIT, |
3.4% |
| Salesforce Inc. |
CRM, |
3.3% |
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Marc Benioff, co-founder and CEO of Salesforce, speaks at an Economic Club of Washington luncheon in Washington, DC, on Oct. 18, 2019.
Nicholas Kamm | AFP | Getty Images
Salesforce shares surged nearly 12% on Thursday, enjoying their biggest single-day rally since August 2020, after the cloud software vendor issued earnings and guidance that trounced analysts’ estimates.
The results show the company, led by co-founder Marc Benioff, is making concessions to activist investors who have built stakes in the business and have raised concerns lately about the company’s revenue and income performance.
After the close of regular trading on Wednesday, Salesforce reported fiscal fourth-quarter adjusted earnings of $1.68 per share, 23% higher than the consensus among analysts polled by Refinitiv. Its earnings forecast for the 2024 fiscal year was 22% higher than expected.
In addition, finance chief Amy Weaver told analysts on a conference call that Salesforce sees a 27% adjusted operating margin for the 2024 fiscal year, meaning the company is two years ahead of schedule with its profitability improvement.
Alongside the earnings report, Salesforce said it’s working with Bain on a business review, and the company announced the elimination of the board’s committee on mergers and acquisitions. That prompted praise from prominent activist Elliott Management, which disclosed a stake in January.
Activists have been ramping up pressure on Benioff to bolster margins as revenue growth slows and the company reckons with dilution from high-priced acquisitions like Tableau and Slack.
“These steps are consistent with our recommendations, and we believe they will help restore value at Salesforce,” Elliott’s Jesse Cohn and Jason Genrich said in a statement.
Salesforce also beat on fourth-quarter revenue, reporting 14% year-over-year growth to $8.38 billion, topping the average analyst estimate of $7.99 billion, according to Refinitiv.
“Wow, what an amazing end of the fiscal year,” Kash Rangan, a Goldman Sachs analyst, said on Wednesday’s earnings call, before before asking his question. “Congratulations to the team. Much, much, much, much better than expected. Brighter days ahead.”
Rangan, who recommends buying the stock, raised his 12-month price target for the second time in a week after the report. More than two dozen other analysts increased their targets as well. The new average price target, at $213.02, is 14% higher than where the stock ended trading on Thursday.
Evercore’s Kirk Materne, one of the analysts who raised their target, wrote “there has always been plenty of optionality for CRM around margins, but until now, it has been a trickle, not a step function move.” Materne has a buy rating on the stock.
Needham analysts led by Scott Berg upgraded the shares to a buy from hold.
“Six years on the sidelines is a long time in our universe but here we are, upgrading CRM to Buy as we believe its FY24 profitability guidance better aligns its cost structure with its intermediate term growth outlook,” they wrote.
After plunging 48% last year amid the tumble in the cloud software sector, Salesforce is now up 41% in 2023 and is trading at its highest level since August.
WATCH: Salesforce earnings highlight how expectation beats can move markets, says Kari Firestone
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Here are the most important news items that investors need to start their trading day:
February’s gloominess carried over to March. The three indicies either fell or landed in flat territory Wednesday (the Nasdaq and the S&P 500 slid while the Dow squeaked out the barest gain), and the yield on the 10-year Treasury note hit 4% for the first time since November. That action indicates the pain is going to stick around a little longer. On Thursday, investors will chew over the latest weekly jobless claims data as they anticipate the Federal Reserve’s next moves in its rate-hiking battle against inflation. Fed Gov. Christopher Waller is slated to speak Thursday afternoon. Follow live markets updates.
Marc Benioff, CEO of Salesforce, at the WEF in Davos, Switzerland on May 25th, 2022.
Adam Galica | CNBC
Salesforce surprised everyone – in a good way – with its earnings report Wednesday. Shares of the enterprise software giant and Slack parent surged around 15% in off-hours trading after the company easily topped Wall Street’s expectations for revenue and profit. Activist investors have been putting the squeeze on Salesforce and its CEO, Marc Benioff, looking for fatter profits. The company recently cut 10% of its workforce, resulting in more than $800 million in restructuring costs, as part of a longer-term attempt to control spending. Benioff also said the company disbanded its board committee on mergers and acquisitions, while it works with consultancy Bain on reviewing Salesforce’s business.
Elon Musk speaking at Tesla Investor Day.
Courtesy: Tesla
Shares of Tesla fell more than 5% in off-hours trading after the electric vehicle company unveiled its latest “master plan,” which, according to CNBC’s Lora Kolodny, was light on details and specifics. CEO Elon Musk spoke in utopian terms as he kicked off the presentation. “There is a clear path to a sustainable-energy Earth. It doesn’t require destroying natural habitats,” he said. “It doesn’t require us to be austere and stop using electricity and be in the cold or anything.” In terms of nitty-gritty business, Tesla is sticking with its goal of producing 20 million EVs a year by 2030. It’s got a long way to go, though. Last year, the company said it delivered a little more than 1.3 million autos.
U.S. President Joe Biden discusses health care costs and access to affordable health care during an event in Virginia Beach, Virginia, February 28, 2023.
Leah Millis | Reuters
In the biggest sign yet that political winds are blowing against environmental, social, and corporate governance, or ESG, guidelines, the Democratic-led Senate on Wednesday voted to overturn a rule that allows retirement funds to consider such progressive standards when making investment decisions. Sen. Jon Tester, a moderate Democrat from Montana, and conservative Democratic Sen. Joe Manchin of West Virginia – who are up for reelection next year in their deeply Republican states – voted with Republicans to make it a 50-46 tally. However, President Joe Biden has said he would veto the measure in order to keep the rule in place. It would be the first veto of his presidency.
Senator Bernie Sanders (I-VT) (L), Starbucks CEO Howard Schultz
Reuters (L) | Getty Images (R)
Sen. Bernie Sanders, the democratic socialist from Vermont, is serious about hauling Howard Schultz in for questioning after the outgoing Starbucks interim CEO declined an invitation to testify before lawmakers. The progressive, pro-union senator set a vote for next Wednesday that will decide whether to subpoena Schultz to give testimony to the Senate Health, Education, Labor and Pensions, or HELP, Committee, which Sanders chairs. Baristas at nearly 300 Starbucks stores have voted to unionize, a movement Schultz has opposed. Sanders, in turn, has accused Schultz of union busting.
– CNBC’s Samantha Subin, Jordan Novet, Lora Kolodny, Christina Wilkie and Amelia Lucas contributed to this report.
— Follow broader market action like a pro on CNBC Pro.
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Marc Benioff, co-founder and CEO of Salesforce, speaks at the World Economic Forum in Davos, Switzerland, on Jan. 18, 2023.
Stefan Wermuth | Bloomberg | Getty Images
Salesforce shares soared 16% in extended trading on Wednesday after the cloud software maker beat Wall Street estimates on profit and issued a better-than-expected forecast.
Here’s how the company did:
Salesforce’s revenue grew 14% year over year in the fiscal fourth quarter, which ended on Jan. 31, consistent with the previous quarter, according to a statement.
The company reported a loss of $98 million, compared with a loss of $28 million in the year-ago quarter.
In January Marc Benioff, Salesforce’s co-founder and CEO, said the company would cut 10% of its workforce, representing over 7,000 people, and that restructuring strategy led to $828 million in costs during the quarter.
Profitability has become a higher priority at Salesforce, which in recent months has been getting pressured by an influx of activist investors, including Third Point, Elliott Management and Starboard Value. The company announced the addition of ValueAct Capital CEO Mason Morfit to its board. At the end of the quarter Bret Taylor, who ran Salesforce as co-CEO alongside Benioff, stepped down.
The past 90 days have been “very intense,” Amy Weaver, Salesforce’s finance chief, said on a conference call with analysts.
The adjusted operating margin, at 29.2%, was the highest in the company’s history and wider than the 25% goal for the fiscal 2026 fiscal year that executives had laid out at its investor day in September.
“Six months ago in September at our Dreamforce Investor Day we shared with you our comprehensive transformation plan, the new day for profitable growth,” Benioff said on the conference call. “But things have changed as we entered our fourth quarter. We recognized that we needed to radically accelerate the transformation plan time frame. We needed to press the hyper-space button and bring the two-year goals forward quickly and exceed them now.”
Benioff said Salesforce has disbanded its board committee on mergers and acquisitions and is working with Bain on a review of the business.
For the fiscal first quarter, the company called for adjusted earnings in the range of $1.60 to $1.61 per share and revenue of $8.16 billion to $8.18 billion. Analysts surveyed by Refinitiv had been looking for $1.32 in adjusted earnings per share and $8.05 billion in revenue.
Salesforce sees adjusted earnings per share for the full 2024 fiscal year of $7.12 to $7.14 and revenue of $34.5 billion to $34.7 billion. Analysts polled by Refinitiv had expected $5.84 in adjusted earnings per share and $34.03 billion in revenue. It called for a 27% adjusted operating margin in the 2024 fiscal year, and 30% in the first quarter of the 2025 fiscal year.
The guidance assumes that there will be no improvement in the longer sales cycles, additional requirements around spending and compression of deals that it has observed in the past three quarters, Weaver said.
The company said it was expanding its share buyback program to $20 billion after announcing its first repurchasing commitment, with up to $10 billion allocated for that purpose, in August.
Salesforce shares have risen 26% so far this year, excluding Wednesday’s after-hours move, outperforming the S&P 500 index, which has gained 3% over the same period.
Executives will discuss the results with analysts on a conference call starting at 5 p.m. ET.
This is breaking news. Please check back for updates.
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Marc Benioff, founder, chairman and CEO of enterprise cloud computing company Salesforce.
Kim Kulish | Corbis News | Getty Images
Jim Cramer suggested Saturday that plans for a leadership change at Club holding Salesforce (CRM) — helmed by co-founder Marc Benioff for more than two decades — may be disclosed in the near future.
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Elon Musk attends The 2022 Met Gala Celebrating “In America: An Anthology of Fashion” at The Metropolitan Museum of Art on May 02, 2022 in New York City.
Dimitrios Kambouris | Getty Images
Elon Musk’s Twitter was sued again in California this week for alleged failure to pay a vendor.
The latest complaint comes from a tech startup called Writer, Inc., and it’s at least the sixth company to sue Twitter in the United States over breach of contract and non-payment since Musk took over about 4 months ago.
The Tesla and SpaceX CEO led a $44 billion buyout of Twitter, which closed around October 27, 2022. He sold billions of dollars worth of his Tesla shares and took on some $13 billion in debt at Twitter as he became the sole director, new owner and CEO there.
Since then, Musk’s social media venture has been sued for non-payment by Writer and at least five others:
A legal and public records database, PlainSite, is tracking these lawsuits as they arise.
Twitter’s alleged non-payment of rent to Columbia REIT, has led to the real estate company defaulting on loans for buildings, including where Musk leases office space at 650 California Street in San Francisco, Fortune first reported.
Twitter has also allegedly fallen behind on payments to larger companies. According to a Platformer report on Thursday, Twitter suddenly cut off employees’ access to Slack this week after failing to pay a bill. Slack is the workplace chat and collaboration platform owned by Salesforce.
In the newest complaint, filed in California Superior Court in San Francisco, Writer says that Twitter failed to pay a bill for the relatively humble amount of $113,856.
Previously known as Qordoba, Writer describes itself as an AI company that helps employees create content that meets their employer’s standards for brand, copy, and other style guidelines.
Writer did not immediately respond to a request for a comment on the matter.
Twitter’s Vice President of Product, Trust & Safety, Ella Irwin, told CNBC via e-mail, “We do not comment on pending litigation or various speculation surrounding Twitter’s financial health.”
Musk has publicly groused about and made light of Twitter’s financial woes. This week, he wrote on Twitter, “Say what you want about me, but I acquired the world’s largest non-profit for $44B lol.”
Nonpayment disputes like these are not common after a leveraged buyout, according to Boston College finance professor Edith Hotchkiss. She said in an email to CNBC that they are “more typical of companies that are within a very short window of filing for bankruptcy.”
Vanderbilt University finance professor Josh T. White, a former SEC economist, agreed the moves are unusual, and said litigation over nonpayment to vendors could result from “incorrect and aggressive capital structure.”
Musk’s Twitter deal was financed with around 30% debt and 70% equity at closing.
White explained that the high debt level is aggressive for a company with volatile and sometimes even negative free cash flow, such as Twitter had experienced in the past three years.
Leveraged buyouts more often target companies with stable cash flows that can be used to service debt and generate a tax shield by deducting interest expense, he wrote.
“Using more debt and less equity reduces the amount of liquid cash Musk and his equity co-investors had to contribute at closing, which can potentially generate a higher internal rate of return if the company turns out to be profitable,” White said.
Meanwhile, even after aggressive cost-cutting measures, including widespread layoffs and cutbacks on perks and infrastructure, Twitter is still probably struggling to generate positive free cash flow to pay its obligations, White suggested. “Nonpayment, and contract violations are certainly a red flag that the company is likely financially distressed.”
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DAVOS, Switzerland – The finance and tech CEOs gathering at the World Economic Forum this week expressed measured optimism about the economy in 2023 — but at least one major risk looms for markets, they said.
The resilient U.S. economy, a mild European winter and China’s reopening have given investors and forecasters hope that a severe recession can be avoided, Citigroup CEO Jane Fraser told CNBC’s Sara Eisen on Tuesday.
“All in all, the year has started off better than everyone expected,” Fraser said. “Everyone’s converging now in the states more around a mild, manageable recessionary scenario, driven by the strength that we’ve got in the labor markets.”
The U.S. economy has slowed since the Federal Reserve began raising interest rates last year, sowing fears that a recession was unavoidable.
In the early weeks of 2023, investors have begun to hope that moderating inflation and strong employment figures could result in a so-called soft landing. But budding optimism at the annual meeting of billionaires, heads of state and business leaders in the Swiss Alps collided with a fresh threat, on top of existing concerns including the Ukraine war and global climate change.
The world’s largest economy risks defaulting on its debt for the first time in modern history this summer as politicians wrangle over raising the country’s debt limit, currently capped at $31.4 trillion. The U.S. is expected to reach its debt limit Thursday, Treasury Secretary Janet Yellen said last week. After that, the Treasury will find ways to fund their debt obligations until at least early June, Yellen said.
That sets up a standoff in Congress in the weeks ahead. Republicans and Democrats will engage in brinkmanship over political goals. The last time a potential default risk surfaced was in 2011, when lawmakers averted disaster after markets convulsed and the U.S. had its credit rating downgraded.
“I don’t think anybody knows what would happen if they really went further than what happened in 2011,” the CEO of a Wall Street bank said on the sidelines of the conference. “That’s why it’s scary.”
The CEO, who declined to be identified speaking candidly, said he had just met a group of U.S. lawmakers worried about the coming impasse.
“It would affect markets and it would be a drag on economic activity because of the uncertainty,” he said. “It would be really bad for us.”
But coming to a deal to increase the U.S. debt limit won’t be easy in a political environment that’s grown even more polarized in the past decade.
Addressing the debt ceiling “is going to be hard,” said Salesforce CEO Marc Benioff on Wednesday. House Speaker Kevin McCarthy, R-Calif., has “got to handle it, but he’s got a lot of issues,” he said.
The newly elected McCarthy is in a bind. While conservative members of his caucus insist they do not want the country to default on its debt, McCarthy is under pressure to demand deep spending cuts. McCarthy has suggested that he won’t support raising the debt ceiling without a compromise on spending.
The situation is a “mess” with at least one possible solution: Congress could pass a “clean debt limit,” according to Peter Orszag, CEO of financial advisory at Lazard. That refers to a borrowing increase without spending cuts.
McCarthy, however, would likely not survive as speaker if he agreed to that, Orszag said.
Another top Wall Street CEO said he planned to push lawmakers at Davos to focus more on spending cuts rather than the debt ceiling.
The worries contrast with early signs this month that formerly frozen markets have begun to awaken. For instance, debt issuance has been “incredibly strong” in January so far, according to Fraser.
It’s too early to say whether those signs are a harbinger of better times for investment banks and the wider economy, she said.
“We’re not out of the woods yet,” Fraser said.
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Microsoft said Wednesday that it’s letting go of 10,000 employees through March 31 as the software maker braces for slower revenue growth. The company is also taking a $1.2 billion charge in the fiscal second quarter, which will result in a negative impact of 12 cents to earnings per share.
Alphabet, Amazon and Salesforce are among the technology companies that have lowered head count in recent weeks. The contraction comes after demand for cloud computing and collaboration services picked up as enterprises, government agencies and schools encouraged remote work to reduce Covid exposure.
Rising prices have prompted companies to become more careful about technology spending, hurting prospects for the tech stocks that outperformed other market sectors year after year. Now Microsoft and its peers are taking stock. In July Microsoft said it will trim less than 1% of employees, and in October it confirmed an additional round of job cuts that reportedly affected fewer than 1,000 workers.
“I’m confident that Microsoft will emerge from this stronger and more competitive,” CEO Satya Nadella told employees in a memo that was posted on Microsoft’s website. The move will reduce Microsoft’s head count by less than 5%, and some employees will find out this week if they’re losing their jobs, he wrote.
Microsoft shares moved modestly higher at the U.S. open after the announcement.
The workforce adjustment will hit all teams and geographies, with more impact coming to sales and marketing than engineering, a company spokesperson told CNBC in an interview.
Employees in the U.S. who are eligible for benefits will receive severance that’s above the market and six months of health care and stock vesting, along with 60 days’ notice before their work ends, Nadella wrote.
Nadella reiterated trends in the business climate that he has described in recent months.
“As we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less,” he wrote. “We’re also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one.”
Earlier this month Nadella had indicated the company might have to make adjustments.
“I think for us as a global company, we’re not going to be immune from what’s happening in the macro,” he said in an interview with CNBC-TV18. “We will have to also get our own sort of operational focus on making sure our expenses are in line with our revenue growth.”
Microsoft has called for 2% revenue growth in the fiscal second quarter, which would be the slowest rate since 2016.
The layoffs are not a major surprise given the deterioration in Microsoft’s cloud-infrastructure and Windows operating system sales over the past few quarters, said Gil Luria, an analyst at DA Davidson who has a buy rating on Microsoft stock.
Investors are very concerned about the margins of many technology companies, including Microsoft, he said.
“I think there’s been a broad expectation from all these companies, especially the ones that hired more over the last two to three years, to adapt and react to a slower-growth environment and show the discipline and the focus on shareholder value that investors need to feel right now as they try to ride out a slower-growing economy,” Luria told CNBC in an interview.
Major layoffs aren’t an annual exercise for 47-year-old Microsoft, but they do happen occasionally. In 2017 Microsoft laid off thousands of employees in a broad reorganization of its sales unit. In 2014, following the acquisition of Nokia’s devices and services business, Microsoft cut 18,000 people.
The charge relates to severance, changes to the company’s hardware lineup and the cost of consolidating leases, Nadella wrote.
“Every one of us and every team across the company must raise the bar and perform better than the competition to deliver meaningful innovation that customers, communities, and countries can truly benefit from,” Nadella wrote. “If we deliver on this, we will emerge stronger and thrive long into the future; it’s as simple as that.”
WATCH: Microsoft’s OpenAI investment won’t help it rival Google search, says tech analyst
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Jim Cramer at the NYSE, June 30, 2022.
Virginia Sherwood | CNBC
Hardly a day goes by without someone asking me, “Why do you like Jay Powell so much?” He will question whether I am somehow buddies with the Federal Reserve chair, or assume I knew him before he got the job.
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Marc Benioff, co-chief executive officer of Salesforce.com Inc., between panel sessions on day two of the World Economic Forum in Davos, Switzerland, on May 24, 2022.
Jason Alden | Bloomberg | Getty Images
Marc Benioff, Salesforce’s co-founder and soon to be sole CEO, indicated in an all-hands meeting on Thursday that more downsizing could be coming, according to people with knowledge of the matter.
The virtual meeting came a day after Salesforce announced that it was cutting 10% of jobs, amounting to over 7,000 positions. Hours later, Amazon said it would lower headcount by 18,000. Tech companies are shrinking their workforce for the first time in years as they reckon with slowing growth, rising interest rates and a potential recession.
Benioff expressed concerns about productivity in parts of the sales organization. About half of Salesforce account executives brought in more than 95% of deals, he told the employees, according to two people who attended by video. The meeting had been scheduled for an hour but ran for over two hours, another person said.
One of the attendees told CNBC that Benioff said the lack of productivity was largely from new account executives.
Fortune reported earlier on the meeting.
During the pandemic and in the years leading up to it, Salesforce expanded rapidly as cloud adoption soared. The company fueled its growth in part through large acquisitions such as Slack and Tableau.
Now Salesforce is retrenching as revenue growth is slowing and as it faces an activist investor concerned about operating leverage. In November, co-CEO Bret Taylor, who was seen as Benioff’s heir apparent, announced his surprise departure after a year sharing the top job. He’s slated to leave at the end of January.
Last month, Benioff posted a Slack message to all employees asking for ways to make new staffers more productive. During Thursday’s meeting, Benioff expressed frustration about media reports that surfaced regarding his comments.
“One of our core values is trust,” Benioff said, according to one of the attendees.
The person said Benioff took a long time to respond to an answer about what Salesforce’s future holds.
Salesforce didn’t immediately respond to a request for comment.
WATCH: Jim Cramer says more tech layoffs are coming after Salesforce cuts 10% of its headcount
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