Salesforce Chairman and Co-CEO Marc Benioff and his team are serious about increasing profit margins after years of making big acquisitions of Mulesoft, Tableau, and Slack.
“For us, I think the market doesn’t fully appreciate how committed we are to growth and margins,” Benioff told Yahoo Finance Live at the software giant’s Dreamforce conference in San Francisco, ahead of several of the company’s recent initiatives listed.
Benioff also didn’t rule out making big deals in the future, echoing the sentiment of Salesforce co-CEO Bret Taylor, but he did point to two ambitious goals the company announced at the conference.
Salesforce has committed to an operating margin of 25% by calendar year 2025, the first time Salesforce has committed to a public operating margin target. If achieved, it would mean a notable increase from the 20.4% target for 2022.
Marc R. Benioff, Chairman and Chief Executive Officer of Salesforce, a member of the World Economic Forum Board of Trustees, reacts as he attends the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland January 23, 2018. Portal/Denis Balibouse
The company also expects sales to hit $50 billion by 2025, a huge increase from Wall Street’s estimate of $31 billion for this year.
“We want to increase our sales,” said Benioff. “We want to increase our margin. We want to increase our market share. We want to increase our customer success. We want to bring people together. It’s all connected.”
Overall, local investors at the conference reacted positively to the news.
“An accelerated pace of innovation on the product side, more detailed insights into major opportunities within the customer base, a strong commitment to improving efficiencies and an increasing focus on shareholder value indicate a sustained EBIT CAGR in excess of 25% and are working to build confidence of investors in these goals,” wrote Keith Weiss, analyst at Morgan Stanley, in a note to clients.
Salesforce showed “solid progress toward restoring investor credibility,” Weiss added. “At Investor Day 2022, the Salesforce management team took the debates from investors head-on, addressing key areas of concern.”
Weiss reiterated a buy-equivalent overweight in Salesforce stock with a price target of $273.
The story goes on
Goldman Sachs analyst Kash Rangan also expressed optimism about Salesforce after his time at Dreamforce. The analyst predicts that Salesforce’s operating margins could breach 30% by calendar year 2026.
Brian Sozzi is a freelance writer and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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