Summary
Salesforce reported fiscal 2024 second quarter revenue of $8.60 billion, up 11.4% from the prior-year quarter. Subscription and support revenue grew 12% and professional services and other revenue grew 3%. Gross profit came to $6.49 billion, up 16.0%, and gross margin was 75.4%, up 3.0 percentage points. Operating income of $1.48 billion rose 664.8%, lifting operating margin to 17.2%, a gain of 14.7 percentage points. Chair and CEO Marc Benioff pointed to record GAAP and non-GAAP operating margins. Net income was $1.27 billion and diluted EPS was $1.28, both up from the prior-year quarter. Non-GAAP operating margin was 31.6% and non-GAAP diluted EPS was $2.12.
The profit improvement came with visible noise from the restructuring plan announced in January 2023. Restructuring cut GAAP operating margin by 50 basis points and GAAP diluted EPS by $0.05 during the quarter, and losses on strategic investments reduced GAAP diluted EPS by $0.02. Salesforce booked $49 million of restructuring costs in the quarter and $760 million in the first half, following a workforce reduction of roughly ten percent. Management expects another $100 million to $350 million of charges in the second half of fiscal 2024.
Cash generation was strong. Operating cash flow was $808 million for the quarter, up 141.9% from the prior-year quarter, and $5.30 billion for the six months, up 32.1%. Free cash flow, a non-GAAP measure, was $0.63 billion, up 379%. Capital expenditures were $180 million in the quarter, down 11.3%, and $423 million year to date, up 10.7%. Buybacks totaled $1.9 billion in the quarter, and over the first six months the company repurchased about 20 million shares for roughly $4.1 billion at an average cost of $198.63 per share. Cash, cash equivalents and marketable securities stood at $12.4 billion.
Backlog metrics held up. Total remaining performance obligation ended the quarter at $46.6 billion, up 12%, and current remaining performance obligation was $24.1 billion, up 12% and 11% in constant currency. Deferred revenue, the current portion, was $14.24 billion, up 11.0%. Data led the service offerings with 16% growth, followed by Sales and Service at 12%, Platform and Other at 11% and Marketing and Commerce at 10%. Asia Pacific revenue grew 20%, Europe 13% and the Americas 10%. Attrition, excluding Slack, was about 8.0%, and headcount fell to 70,456 from 79,824 a year earlier as marketing and sales headcount dropped 17%.
For the first six months of the fiscal year, revenue was $16.85 billion, up 11.4%, and operating income was $1.89 billion, up 786.4%. Guidance moved higher. For the third quarter, Salesforce guides revenue of $8.70 billion to $8.72 billion, up 11% year over year, with non-GAAP diluted EPS of $2.05 to $2.06, and current remaining performance obligation growth slightly above 11%. For the full fiscal year, revenue guidance was raised to $34.7 billion to $34.8 billion, up 11%, GAAP operating margin guidance to 13.3% and non-GAAP operating margin guidance to 30.0%. Non-GAAP diluted EPS guidance for the full year is $8.04 to $8.06. Operating cash flow growth guidance rose to 22% to 23%, a target that carries an estimated 14% to 16% headwind from restructuring charges.
The risks are familiar but tangible. Management described measured buying behavior, with elongated sales cycles, additional deal approval layers and deal compression continuing through the quarter. Slower growth in new and renewal business, if sustained, would weigh on remaining performance obligation and revenue. Foreign currency moves added less than one percent to revenue in the quarter, and the safe harbor language flags data privacy rules, interest rate moves and geopolitical conflict in Europe among the items that could shift results.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2024 | Q1 FY2024 | QoQ | Q2 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $8.60B | $8.25B | +4.3% | $7.72B | +11.4% |
| Gross profit | $6.49B | $6.12B | +6.0% | $5.59B | +16.0% |
| Gross margin | 75.4% | 74.2% | +1.2 pp | 72.5% | +3.0 pp |
| Research & development | $1.22B | $1.21B | +1.1% | $1.33B | -8.2% |
| Sales & marketing | $3.11B | $3.15B | -1.3% | $3.42B | -9.1% |
| General & administrative | $632.0M | $638.0M | -0.9% | $647.0M | -2.3% |
| Total operating expenses | $5.01B | $5.71B | -12.2% | $5.40B | -7.1% |
| Operating income (loss) | $1.48B | $412.0M | +258.3% | $193.0M | +664.8% |
| Operating margin | 17.2% | 5.0% | +12.2 pp | 2.5% | +14.7 pp |
| Net income (loss) | $1.27B | $199.0M | +536.7% | $68.0M | +1763.2% |
| Net margin | 14.7% | 2.4% | +12.3 pp | 0.9% | +13.8 pp |
| Diluted EPS | $1.28 | $0.20 | +$1.08 | $0.07 | +$1.21 |
Risks
MD&A states that in FY2024 Q2 the company continued to see the impact of macroeconomic factors and more measured customer buying behavior, with elongated sales cycles, additional deal approval layers, and deal compression. Slower growth in new and renewal business, if sustained, could pressure remaining performance obligation, revenues and the ability to meet financial guidance and long-term targets.
Risk Factors say the market for certain offerings, including AI offerings, remains relatively new and it is uncertain whether related efforts and investments will ever result in significant revenue. They also warn generative AI and Einstein GPT bring accuracy, bias, toxicity, privacy, security, data provenance and copyright risks, and that deploying AI systems may increase computing costs and impact profit margin.
Risk Factors and MD&A highlight a more time-consuming and expensive sales cycle as sales efforts target larger enterprise and governmental customers. MD&A notes less demand for larger, multi-year transformation engagements and delayed projects in the first half of fiscal 2024, and says these trends may continue in the near term.
Risk Factors say the January 2023 Restructuring Plan, including an approximately ten percent workforce reduction and office space reductions, could negatively impact the ability to attract, integrate, retain and motivate key employees and disrupt sales organization productivity. MD&A reports marketing and sales headcount decreased 17 percent and research and development headcount decreased 5 percent since July 31, 2022.
Risk Factors detail evolving privacy and AI regulation, including GDPR, CCPA/CPRA, the EU Digital Services Act and cross-border data transfer uncertainty after the CJEU invalidated the EU-U.S. Privacy Shield. New statutory damages for certain data breaches under the CPRA and other state laws may increase liability and customer demands on the company.
Risk Factors emphasize partial or complete loss of invested capital and fair value volatility in the strategic investment portfolio. MD&A reports losses on strategic investments, net were $(29) million for the three months ended July 31, 2023 compared with gains of $45 million in the prior year, and $(170) million for the six months ended July 31, 2023 compared with gains of $52 million, driven by impairments on privately held equity investments.
Risk Factors disclose that in April 2022 a threat actor obtained unauthorized access to several Heroku databases, downloaded stored customer security credentials and passwords for GitHub, and accessed an encryption key for a subset of customer user accounts. Although the company says the incident did not materially affect business or financial results, it warns future incidents could have a material adverse effect.
Risk Factors say customers have no obligation to renew after typical 12 to 36 month subscription terms, and renewals may be for fewer subscriptions, shorter contract lengths or lower-cost offerings, particularly in times of economic uncertainty. MD&A reports the attrition rate, excluding Slack, was approximately 8.0 percent as of July 31, 2023, and that MuleSoft and Tableau were included in the attrition calculation beginning in the first quarter of fiscal 2024.
Risk Factors describe substantial debt, lease commitments and other contractual obligations that could impair financing flexibility and dedicate cash flow to debt service. As of July 31, 2023, total carrying value of senior unsecured debt was $9.4 billion, with $1.0 billion of 2024 Senior Notes due in the next 12 months, and future non-cancelable minimum lease payments were approximately $4.9 billion.
Risk Factors cite foreign currency fluctuations and Argentina's 2023 amendments to foreign exchange controls as risks that can add volatility to operating results. MD&A says foreign currency fluctuations positively impacted revenues by less than one percent in the three months ended July 31, 2023 and positively impacted current remaining performance obligation by approximately one percent as of July 31, 2023 compared with constant currency rates.
SaaS KPIs
All quarters →Free cash flow
Non-GAAP operating margin
Current remaining performance obligation (cRPO)
Remaining performance obligation (RPO)
Summary, forecast, risks and KPIs are extracted from Salesforce, Inc.'s SEC filings for Q2 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.