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Salesforce (NYSE: CRM) recently announced its second-quarter results that continued to surpass market expectations. But its weaker-than-expected outlook caused concern as the global recessionary conditions appear to be hitting the tech giants as well.

Salesforce’s Financials

Salesforce’s revenues for the second quarter grew 26% to $7.72 billion, above analyst estimates of $7.69 billion. Adjusted earnings of $1.19 per share was also better than the market’s forecast of $1.02 per share.

By segment, Subscription and support revenues grew 21% to $7.14 billion, Professional services and other revenues grew 35% to $577 million.

For the third quarter, Salesforce forecast revenues of $7.82-$7.83 billion and an EPS of $1.20-$1.21. The market was looking for $7.38 billion and an EPS of $1.21. Salesforce expects to end the current fiscal year with revenues of $30.9-$31 billion and an EPS of $4.71-$4.73. Last quarter, it had announced expectations of $31.7-$31.8 billion for the year. The market was looking for revenues of $31.01 billion and an EPS of $4.74 for the year. Its conservative outlook reflects the impact of macroeconomic conditions that Salesforce is concerned about.

Salesforce’s Expanding Vertical Offerings

During the quarter, Salesforce continued to release several vertical-focused offerings. For the consumer goods companies, it released features that will give brands a better way to navigate increasing market complexity, drive profitable growth, and increase customer loyalty through connected data, automation, and expanded selling opportunities. The current inflation is driving severe cost pressures within all industries. Consumer goods industries are seeing cost increases due to global supply chain issues that are leading to decreased sales and declining brand loyalty. The added features will allow these businesses to optimize trade activity and trade planning on a single, connected platform, manage promotional plans, and allocate trade funds to maximize revenue. With visibility into trade budgets and dynamic funding, sales reps will be able to ensure that their promotions are optimized to avoid overspending.

It released a new B2B Commerce wholesale app that maximizes wholesale buying efficiency for consumer goods companies with new virtual showrooms, sales collaboration, and large cart ordering. The new Commerce Marketplace helps integrate the fragmented buyer and seller landscape to create new revenue streams, giving brands and distributors the ability to expand reach by adding inventory to retail partners quickly. It also released a new MuleSoft Accelerator for Consumer Goods that will allow companies to have a single source of truth for data and quickly deploy trade and retail execution capabilities that can leverage existing master data in traditional back-end systems.

For retailers, Salesforce also announced Composable Storefront, a fully-customizable, headless digital storefront that gives online retailers the ability to make site changes quickly and adds flexibility needed to increase sales, conversions and basket size, while helping to drive down costs. It introduced pre-built packages made specifically for headless implementations and use cases with commerce partners. These features include integrations, pricing, and implementation accelerators from across the Salesforce ecosystem. Headless commerce helps separate the front end and back end of an e-commerce solution, thus enabling brands to quickly and affordably customize digital storefronts without disrupting the shopping experience.

For the financial services firms, it launched features built specifically for banking, wealth management, and insurance institutions. Salesforce for Financial Services now offers more targeted and trusted automation and AI powered by Client 360 to help teams unlock insights, deliver great customer service, and drive operational efficiencies. The new features include proactive service and call deflection that help financial services firms reduce operating expenses while maintaining quality service experiences and drive personalized service with automation.

But the market was not very pleased with Salesforce’s outlook. The $600 million reduction in its outlook for the year was unexpected with some analysts believing that Salesforce has used this opportunity to provide a very conservative outlook to handle the elongated sales cycles.  

Meanwhile, Salesforce’s stock is trading at $153.53 with a market capitalization of $153.69 billion. It had touched a record high of $311.75 in November last year. The stock fell to a 52-week low of $150.87 earlier this month.

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