Earnings Preview: Watch out for outlook updates from Salesforce Q2 earnings

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Salesforce (NYSE: CRM) stock performance has remained muted in the last 12 months. After the solid Q4 results, shares touched a new 52-week high of $167 mark in late April but tapered off as the outlook failed to impress the street. The stock price is still trading at $144 mark today, which is about 14% down from April levels. The CRM giant is slated to report its second quarter results on August 22 after the bell.

Will Tableau deal closure aid in outlook lift?

Earlier this month, Salesforce announced that it has completed the Tableau acquisition. The cloud platform acquired the data analytics firm in June for $15.7 billion in an all-stock deal. Post the announcement, the company has raised its fiscal 2020 outlook. Revenue was revised upwards to $16.45-16.65 billion and adjusted EPS of $2.68-2.70.

Since the deal is now closed, Salesforce has hinted this month that it would provide an update on the guidance on Thursday. Investors would be tracking closely whether the firm is revising the outlook on August 22. The street is anticipating top line of $16.64 billion and non-GAAP earnings of $2.64 for the full-year period.

Q2 Expectations

Last quarter, Salesforce saw increased demand for its products from its customers resulting in 24% jump in revenues and 26% jump in adjusted EPS, surpassing street estimates. All four cloud services offerings recorded double-digit growth. Service Cloud joined Sales Cloud reporting $1 billion quarterly run rate, which is a good sign for investors. Thanks to the MuleSoft deal, “Salesforce platform and other” saw a 46% surge in sales.

Investors would be hoping the momentum to continue into the second quarter. Salesforce is expecting second quarter revenue of $3.94-3.95 billion and GAAP loss of 8-7 cents per share. Analysts are anticipating top line to come in at $3.95 billion and adjusted earnings of 47 cents per share.

Looking Ahead

Salesforce is focusing on improving its moat both organically and inorganically. Internally, it’s up-selling and cross-selling its products to its clients. Based on the demand, the cloud provider is augments its offerings catering to the needs of the customers. On the inorganic side, the company has acquired MuleSoft, Datorama and Tableau this year to complement its existing offerings.

The street is guiding Q3 revenue of $4.21 billion and adjusted earnings of 62 cents per share. With the fundamentals intact, shareholders can expect better performance from the firm in the latter half of the year.

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