Salesforce beats quarterly earnings, but forecast misses

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Salesforce beats quarterly earnings, but forecast misses

Salesforce.com Inc. delivered a big earnings beat in its first full quarter with Slack Technologies Inc. on board, but projections for the end of the year slammed the stock in after-hours trading Tuesday.

A third quarter profit of $468 million, or 47 cents a share, was reported by Salesforce CRM, with sales of $6.86 billion, up from $5.42 billion a year ago. After accounting for stock-based compensation and other effects, the cloud software company reported earnings of $1.27 a share, a decline from earnings of $1.72 a share in the year-ago quarter.

The average expected earnings for analysts was 92 cents a share on sales of $6.8 billion, according to FactSet.

For the fourth quarter, Salesforce projected adjusted earnings of 72 cents to 73 cents a share of sales of $7.22 billion to $7.23 billion. Analysts were expecting earnings of 82 cents a share on sales of $7.24 billion, according to FactSet.

In its first-quarter and second-quarter reports, Salesforce raised its full-year expectations, and management now expects full-year revenue of $26.39 billion to $26.4 billion, and adjusted earnings of $4.68 to $4.69 a share in sales of $26.25 billion to $26.35 billion three months ago.

After the results were released, Salesforce shares fell more than 6% in after-hours trading, after closing with a 3.9% decline at $285.25.

In late July, Salesforce closed its big-money acquisition of workplace-communications software Slack, just before the third quarter began in August. The customer-relationship software company made Slack the focus at its annual Dreamforce conference in September, showing off how it plans to integrate Slack with other large acquisitions, such as MuleSoft and Tableau, as well as its different verticals focused on specific industries.

For Microsoft, Salesforce's deal for Slack creates a bigger threat to the company.

Salesforce predicts a significant land- and expand runway ahead for Slack, while the young platform now has the added benefit of an army at its disposal to sell the product, Monness, Crespi, Hardt Co. analyst Brian J. White wrote in an earnings preview, while maintaining a buy rating and $328 price target.

In Tuesday's release, Salesforce did not break out Slack's quarterly performance, but Chief Financial Officer Amy Weaver said Slack saw another strong quarter, and we are pleased with Slack's representation in our largest deals. Salesforce shares rebounded around Dreamforce time but fell back in recent weeks after hitting record highs in early November. The stock fell 7.7% before breaking the run Monday after a six-session losing streak that was its longest in nearly two years.

See also: For Salesforce investors, Slack must start supercharging growth — and the stock price.

The Salesforce shares have gained 28.4% so far this year, while the S&P 500 index SPX has gone up 23.9%.