Salesforce (NYSE:CRM) Q4 Sales Beat Estimates, Stock Soars

Anthony Lee /
2023/03/01 4:08 pm EST

Customer relationship management software maker Salesforce (NYSE:CRM) announced better-than-expected results in the Q4 FY2023 quarter, with revenue up 14.4% year on year to $8.38 billion. Guidance for next quarter's revenue was $8.17 billion at the midpoint, which is 1.77% above the analyst consensus. Salesforce made a GAAP loss of $98 million, down on its loss of $28 million, in the same quarter last year.

Is now the time to buy Salesforce? Access our full analysis of the earnings results here, it's free.

Salesforce (CRM) Q4 FY2023 Highlights:

  • Revenue: $8.38 billion vs analyst estimates of $7.99 billion (4.9% beat)
  • EPS (non-GAAP): $1.68 vs analyst estimates of $1.36 (23.4% beat)
  • Revenue guidance for Q1 2024 is $8.17 billion at the midpoint, above analyst estimates of $8.03 billion
  • Management's revenue guidance for upcoming financial year 2024 is $34.6 billion at the midpoint, beating analyst estimates by 1.39% and predicting 10.4% growth (vs 18.7% in FY2023)
  • Free cash flow of $2.57 billion, up from $115 million in previous quarter
  • Gross Margin (GAAP): 75%, up from 72.5% same quarter last year

“For the full year we delivered $31.4 billion in revenue, up 18% year-over-year, or 22% in constant currency, one of the best performances of any enterprise software company our size,” said Marc Benioff, Chair and CEO of Salesforce.

Launched in 1999 from a rented one-bedroom apartment in San Francisco by Marc Benioff and his three co-founders, Salesforce (NYSE:CRM) is a software as a service platform that helps companies access, manage and share sales information.

Companies need to be able to interact with and sell to their customers as efficiently as possible. This reality, coupled with the ongoing migration of enterprises to the cloud drives demand for cloud-based customer relationship management (CRM) software that integrate data analytics with sales and marketing functions.

Sales Growth

As you can see below, Salesforce's revenue growth has been strong over the last two years, growing from quarterly revenue of $5.82 billion in Q4 FY2021, to $8.38 billion.

Salesforce Total Revenue

This quarter, Salesforce's quarterly revenue was once again up 14.4% year on year. We can see that the company increased revenue by $547 million quarter on quarter. That's a solid improvement on the $117 million increase in Q3 2023, so shareholders should appreciate the acceleration of growth.

Guidance for the next quarter indicates Salesforce is expecting revenue to grow 10.2% year on year to $8.17 billion, slowing down from the 24.3% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $34.6 billion at the midpoint, growing 10.4% compared to 18.3% increase in FY2023.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.


What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Salesforce's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 75% in Q4.

Salesforce Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.75 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is around the average of what we typically see in SaaS businesses. Gross margin has a major impact on a company’s ability to invest in developing new products and sales & marketing, which may ultimately determine the winner in a competitive market, so it is important to track.

Key Takeaways from Salesforce's Q4 Results

With a market capitalization of $162 billion, more than $12.5 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

It was good to see Salesforce outperform Wall St’s revenue expectations this quarter and provide a positive outlook. And we were also glad to see the improvement in gross margin. On the other hand, the revenue guidance for next year indicates a slowdown in absolute terms. Zooming out, we think this was good quarter, showing the company is staying on target. The company is up 10% on the results and currently trades at $184.05 per share.

Should you invest in Salesforce right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.