Salesforce, led by CEO Marc Benioff, has recently undergone a restructuring of its top management team following the announcement of a successful quarter. Despite beating expectations in terms of revenue and profit, the company’s growth rate of 11.3% for the quarter was its slowest since 2010, even after multiple acquisitions.
One of the notable changes is the appointment of Miguel Milano as Chief Revenue Officer. Milano is a familiar face at Salesforce, having previously worked there for a decade before moving on to Celonis.
He has now returned to the company. Another key addition is Ariel Kelman, who takes on the role of Chief Marketing Officer. Kelman brings with him prior experience from both Amazon Web Services and Oracle. Additionally, Kendal Collins, formerly associated with Okta and Cisco, has been selected as the Chief of Staff for the CEO.
Brian Millham, the current President and Chief Operating Officer of Salesforce, will retain his titles while also assuming responsibility for marketing, employee success, and business technology.
This move consolidates approximately 70% of the firm’s reporting structure under Millham. A leaked memo suggests that Millham is a potential successor to Benioff when the time comes for a leadership transition.
It is worth noting that several activist investors, including Elliott Management, ValueAct, Inclusive Capital, and Starboard Value, have invested in Salesforce and have pushed for operational improvements and cost-control measures.
Despite an adjusted gross margin of 27% for the quarter, which was close to the target of 30%, unadjusted figures revealed a margin of only 5%.
Looking ahead, Salesforce reported an 11% increase in remaining performance obligation (RPO) to $46.7 billion, and a 12% rise in current remaining performance obligation (cRPO) to $24.1 billion.
However, these growth rates were relatively modest. The subscription and support services sector performed well with sales of $7.642 billion, surpassing estimates. However, no single business within this segment stood out significantly.
On the other hand, the smaller professional services segment generated sales of just $605 million, falling short of expectations.
In terms of guidance, Salesforce projected revenue of $8.51 billion to $8.53 billion for the current quarter, indicating growth of around 10%. The company also expects to achieve unadjusted earnings per share (EPS) of $0.79 to $0.80 and adjusted EPS of $1.89 to $1.90, surpassing Wall Street’s estimate of $1.70. These projections indicate anticipation of margin expansion.
For the full year, Salesforce forecasts revenue of $34.5 billion to $34.7 billion, reflecting a growth rate of approximately 10%, which is considered disappointing. The company’s GAAP EPS guidance for the year is $2.67 to $2.69, with adjusted EPS expected to be in the range of $7.41 to $7.43.
Wall Street had previously estimated adjusted EPS to be around $7.14. Once again, these figures align with Salesforce’s internal goals of improving margins.
