Salesforce (NASDAQ:NYSE:CRM) has experienced a 53% rally year-to-date, with its Q2 earnings of $2.12 per share surpassing estimates. This marks the eighth consecutive quarter the software giant has exceeded analysts' forecasts. Despite the strong performance, the stock has experienced a slight decline since its earnings beat on August 30.
The company's revenue grew by 11% year-over-year to $8.6 billion, with an operating income margin of 31.6%, achieving its 30% margin target three quarters ahead of schedule. In response to price hikes and robust demand for its offerings, Salesforce raised its annual guidance, projecting Fiscal 2024 revenue to be between $34.7 billion–$34.8 billion, and its adjusted operating margin is expected to be 30%.
Salesforce is heavily investing in AI, integrating features into its products and services through alliances and acquisitions such as Airkit.ai. Over the past seven years, the company has allocated $20 billion towards R&D to integrate the latest technologies like generative AI, culminating in the launch of Einstein GPT in March.
However, concerns have been raised due to stagnant or decelerating revenue growth and departures of top management executives over the past year. CEO Marc Benioff's sell transactions have also been under scrutiny. In an effort to counteract these concerns, Salesforce increased its share repurchase plan from $10 billion to $20 billion and announced plans to hire more than 3,000 people.
Earlier in August, Salesforce increased prices across most of its core product offerings by an average of 9%. The company's current valuation appears fairly valued with a forward P/E ratio of 25.8x, similar to its peers but a significant discount from its five-year average of 50x.
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