Salesforce (NYSE: CRM) is scheduled to report its fiscal Q4 2023 results on Wednesday, March 1, 2023. We expect Salesforce to beat the consensus estimates of earnings, while revenue will remain in line (just above) with the expectations. The company posted better-than-expected results in the last quarter, with total revenues of $7.84 billion – up 14% y-o-y. It was due to a 13% increase in the subscription & support revenues and a 25% jump in the professional services & other segment. The growth in subscription & support revenues was because of a 12% rise in each of the sales, service, and marketing & commerce clouds, an 18% improvement in the platform & others, and a 13% increase in the data sub-segment. We expect the same trend to continue in Q4 (Note – Salesforce’s FY’22 ended on January 31, 2022. Q4 FY’23 refers to the quarter that ended on January 31, 2023).
Our forecast indicates that Salesforce’s valuation is $202 per share, which is 25% above the current market price of $162. Our interactive dashboard analysis on Salesforce’s Earnings Preview has more details.
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(1) Revenues expected to remain in line (just above) with the estimates
Salesforce’s revenues grew 20% y-o-y to $23 billion in the first three quarters of FY 2023.
- The subscription & support posted a growth of 19% y-o-y in the first nine months of FY2023. Notably, the segment contributes more than 90% of the company’s top line. We expect the same trend to continue in the fourth quarter.
- The professional services & other revenues improved by 30% in the first three-quarters of FY2023. It was partly because of organic growth and partly due to the acquisitions. We expect the same momentum to continue in Q4.
- Overall, we estimate Salesforce’s revenues to remain around $30.97 billion for FY 2023.
Trefis estimates Salesforce’s fiscal Q4 2023 revenues to be around $8.01 billion, just above the $7.99 billion consensus estimate.
(2) EPS to marginally beat the consensus estimates
Salesforce Q4 FY2023 adjusted earnings per share (EPS) is expected to be $1.39 per Trefis analysis, 2% above the consensus estimate of $1.37. While the top line posted growth in the first nine months of FY2023, the net income decreased 79% y-o-y to $306 million. It was partly because of higher expenses as a % of revenues and partly due to lower gains on strategic investments. Notably, the gains on strategic investments decreased from $1.2 billion to $75 million. We expect the Q4 results to be on similar lines. Overall, Salesforce is likely to report an annual GAAP EPS of $1.65 for FY 2023.
(3) Stock price estimate is 25% more than the current market price
We arrive at Salesforce’s valuation, using a GAAP EPS estimate of around $1.65 and a P/E multiple of just below 123x in fiscal 2023. This translates into a price of $202, which is 25% above the current market price of around $162.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year
|S&P 500 Return||-3%||3%||77%|
|Trefis Multi-Strategy Portfolio||-4%||7%||237%|
 Month-to-date and year-to-date as of 2/27/2023
 Cumulative total returns since the end of 2016