Salesforce Q1 revenue jumps 11%: stock is still taking a hit

Salesforce Inc (NYSE: CRM) is slipping in extended trading on Wednesday even though it reported better-than-expected EPS for its first financial quarter.

Salesforce stock down on disappointing guidance

The stock is being hit because the management failed to impress with its guidance. $CRM now forecasts its sales to fall between $9.20 billion and $9.25 billion on up to $2.36 a share of earnings in Q2.

Analysts, in comparison, were at $9.34 billion and $2.40 per share, respectively. Marc Benioff – the chief executive of Salesforce Inc said in a press release today:

The New York listed firm ended Q1 with $26.4 billion of current remaining performance obligations – up 10%. Salesforce stock is now down close to 30% versus its year-to-date high in early March.

Notable figures in Salesforce Q1 earnings release

• Earned $1.53 billion versus the year-ago $199 million
• Per-share earnings also improved from 20 cents to $1.56
• Adjusted EPS printed at $2.44 as per the earnings report
• Revenue jumped 11% year-over-year to $9.13 billion
• Consensus was $2.37 a share on $9.15 billion in revenue

Salesforce saw an annualised growth of 12% in its subscription and support revenue that helped offset a 9.0% decline in professional services revenue in the recently concluded quarter. CEO Benioff also said on Wednesday:

Salesforce dividend and share repurchase

Salesforce returned a total of $2.60 billion to its shareholders in the first quarter. $2.2 billion of it was in the form of stock repurchase and the remaining in dividend payments.

$CRM improved its operating margin by a whopping 1,370 basis points to 18.7% in Q1. Still, the $263 billion giant based out of San Francisco, California lowered its full year operating margin outlook to 19.9% on Wednesday.

Salesforce ended its recent quarter with $6.08 billion of free cash flow that translates to a 43% growth on a year-over-year basis. According to Amy Weaver - its chief of finance:

Earlier in May, Wells Fargo analyst Michael Turrin reiterated his "equal weight" rating on Salesforce stock and trimmed his price objective to $300 which nonetheless suggests about a 33% upside from here.