Bret Taylor (right), co-CEO of Salesforce.com Inc., and Marc Benioff, co-CEO of Salesforce.com Inc. wear bunny ears during their keynote speeches at the 2022 Dreamforce conference in San Francisco, California, September 2022 Tuesday 20th.
Malena Sloth | Bloomberg | Getty Images
Shares of Salesforce rose nearly 3% in after-hours trading Wednesday after the enterprise software maker announced a new long-term profit target, signaling the company’s determination to improve operational efficiency.
Several cloud software companies, including Salesforce, are less attractive to investors.
Management teams at cloud companies are trying to regain interest by emphasizing cost-saving initiatives and an early timeline to profitability. Salesforce itself says it will be more cautious about adding talent.
The company went even further on Thursday, when Salesforce’s treasurer, Amy Weaver, revealed new targets for fiscal 2026 at the company’s investor day during the company’s Dreamforce conference in San Francisco.The company’s goal is to 25% Adjusted Operating Margin, including future acquisitions, she said.This compares to the 20% target announced by Salesforce a year ago for its fiscal year 2023. Adjusted operating margin was 19.9% for the quarter ended July 31.
Salesforce said it intends to reduce adjusted sales and marketing spending as a percentage of revenue to below 35% by 2026 through increased self-service, alliances with partners and improved sales force productivity. In terms of marketing, the idea is to leverage proprietary marketing channels. In the July quarter, GAAP sales and marketing accounted for more than 44% of revenue.
Additionally, Salesforce is keen to manage general and administrative expenses, in part by evaluating real estate assets in hybrid workplaces.
Weaver reiterated a revenue target of $50 billion for fiscal 2026 announced a year ago, but said the figure now takes into account $2 billion in currency headwinds since last year’s investor day.
On Wednesday, Salesforce stock fell to a 52-week low. Weaver said the company has begun repurchasing its own stock as part of its first share repurchase program.
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