Salesforce commits $50 billion for new buybacks as revenue guidance falls short

Salesforce saw its shares drop by 3% during after-hours trading on Wednesday, following the release of its latest financial results. While the customer service software company reported a solid year-on-year revenue growth and updated its long-term revenue outlook, its fiscal 2027 revenue projections fell short of Wall Street expectations. For the fourth quarter that ended January 31, Salesforce's revenue increased by 12%, marking its most robust growth rate in two years. The company has announced a substantial allocation of $50 billion for share buybacks, a move aimed at boosting shareholder value. In terms of net income, Salesforce reported $1.94 billion, or $2.07 per share, which is an increase from $1.71 billion, or $1.75 per share from the previous year. The adjusted earnings per share, which excludes various costs including stock-based compensation, showed promising figures as well. The remaining performance obligation, which encompasses contracted but unrecognized revenue, stood at an impressive $35.1 billion, surpassing the StreetAccount consensus of $34.53 billion. Looking ahead, Salesforce has provided guidance for the fiscal first quarter, projecting adjusted earnings per share between $3.11 and $3.13, with anticipated revenues ranging from $11.03 billion to $11.08 billion. Analysts had predicted a slightly lower adjusted earnings per share of $3.00 and revenue of $10.99 billion. For the fiscal year 2027, the company expects adjusted earnings per share to fall between $13.11 and $13.19, with revenue targets set at $45.8 billion to $46.2 billion, indicating a growth rate of 10% to 11%. This forecast aligns closely with the LSEG consensus of $13.12 per share and $46.06 billion in revenue. Salesforce has now revised its revenue target for fiscal 2030 to $63 billion, up from a previously stated goal of over $60 billion. This figure exceeds the expectation of $59.07 billion from analysts surveyed by LSEG. Despite these developments, Salesforce shares have tumbled approximately 28% year-to-date, contrasting sharply with the S&P 500 index's 1% gain. Investor concerns have intensified regarding the potential impact of generative artificial intelligence on the growth prospects of major software firms. For instance, IBM experienced a staggering 13% drop in its stock price after a blog post from Anthropic suggested that its AI tool could modernize legacy code, causing ripples of uncertainty across the industry. During the quarter, Salesforce launched an AI-powered Slackbot for its subscribers and completed its $8 billion acquisition of Informatica, which contributed $399 million in revenue. The company is also pushing forward with its Agentforce AI technology, designed for automating customer service and various business functions, reporting an annualized revenue exceeding $800 million in the last quarter. Morgan Stanley analysts, holding a buy rating on Salesforce stock, noted in a recent client communication that discussions with partners suggest the company is still in the early stages of its growth potential. An earnings call featuring Salesforce executives, alongside leaders from SharkNinja and Wyndham Hotels & Resorts, is scheduled for 5 p.m. ET to delve deeper into these results.