Summary
Salesforce closed FY2024 Q3, the quarter ended October 31, 2023, with revenue of $8.72 billion, up 11 percent from the prior-year quarter and 10 percent in constant currency. Subscription and support revenue grew 13 percent, while professional services and other revenue declined 4 percent. Management described the period as continued execution on the profitable growth plan set in motion the prior year, and it called the company the number one AI CRM and the third largest enterprise software company by revenue. Foreign currency added roughly one percent to total revenue in the quarter. For the nine months ended October 31, 2023, revenue was $25.57 billion, up 11 percent, with Americas revenue at $17.11 billion and Asia Pacific revenue growing 18 percent.
Profitability moved sharply higher. GAAP gross profit was $6.56 billion for the quarter, up 14.2 percent, and gross margin reached 75.3 percent from 73.4 percent. GAAP operating income was $1.50 billion, up 226.3 percent, lifting GAAP operating margin to 17.2 percent from 5.9 percent. GAAP net income was $1.22 billion, up 482.9 percent, and GAAP diluted EPS was $1.25, up 495.2 percent. On a non-GAAP basis, operating margin was 31.2 percent and diluted EPS was $2.11. Restructuring tied to the January 2023 plan weighed on GAAP operating margin and GAAP diluted EPS, and losses on strategic investments also hurt GAAP diluted EPS. Management raised the full-year non-GAAP operating margin guidance to 30.5 percent.
Cost cuts explain much of the gain. Full time equivalent headcount was 70,843 at October 31, 2023, down from 79,824 at October 31, 2022. Marketing and sales headcount fell 18 percent, general and administrative headcount fell 20 percent, and research and development headcount fell four percent, reflecting the restructuring plan and the hiring pause that began in the second quarter of fiscal 2023. Total operating expenses fell to $5.06 billion from $5.29 billion, and the biggest dollar decline came in marketing and sales, which dropped $172 million. The company expects marketing and sales, general and administrative, and research and development spending to stay steady or improve as a share of revenue in the near term.
Cash generation was strong. Operating cash flow for the quarter was $1.53 billion, up 389 percent from the prior-year quarter, and free cash flow, a non-GAAP measure, was $1.37 billion. Capital expenditures were $166 million, down 16.2 percent. For the nine months ended October 31, 2023, operating cash flow was $6.83 billion, up 58 percent. Remaining performance obligation ended the quarter at $48.3 billion, up 21 percent, and current remaining performance obligation grew 14 percent, or 13 percent in constant currency. Deferred revenue was $12.56 billion. The company returned $1.9 billion to stockholders through buybacks in the quarter and about $6.0 billion over the nine months, repurchasing roughly 29 million shares.
Guidance points to slower top-line growth with wider margins. For Q4 FY24, management initiated revenue guidance of $9.18 billion to $9.23 billion, up 10 percent, non-GAAP diluted EPS guidance of $2.25 to $2.26, and current remaining performance obligation growth guidance of 10 percent. For the full fiscal year, it narrowed revenue guidance to $34.75 billion to $34.8 billion, up 11 percent, set non-GAAP diluted EPS at $8.18 to $8.19, and lifted operating cash flow growth guidance to 30 to 33 percent. Management noted that the guidance assumes no change in the value of the strategic investment portfolio.
Risks stayed familiar. Salesforce cited elongated sales cycles, additional deal approval layers, and deal compression, along with measured customer buying behavior. It said slower growth in new and renewal business, if sustained, could pressure remaining performance obligation, revenue, and the ability to meet financial guidance and long-term targets. Attrition, excluding Slack, ran about 8.0 percent. Management expects $60 million to $100 million in additional restructuring charges in the fourth quarter of fiscal 2024, and it flagged foreign currency swings and the seasonal fourth-quarter billing cycle as factors that could move near-term results.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $8.72B | $8.60B | +1.4% | $7.84B | +11.3% |
| Gross profit | $6.57B | $6.49B | +1.2% | $5.75B | +14.2% |
| Gross margin | 75.3% | 75.4% | -0.1 pp | 73.4% | +1.9 pp |
| Research & development | $1.20B | $1.22B | -1.3% | $1.28B | -5.9% |
| Sales & marketing | $3.17B | $3.11B | +1.9% | $3.35B | -5.1% |
| General & administrative | $632.0M | $632.0M | ±0.0% | $664.0M | -4.8% |
| Total operating expenses | $5.06B | $5.01B | +1.0% | $5.29B | -4.3% |
| Operating income (loss) | $1.50B | $1.48B | +1.7% | $460.0M | +226.3% |
| Operating margin | 17.2% | 17.2% | +0.1 pp | 5.9% | +11.3 pp |
| Net income (loss) | $1.22B | $1.27B | -3.4% | $210.0M | +482.9% |
| Net margin | 14.0% | 14.7% | -0.7 pp | 2.7% | +11.4 pp |
| Diluted EPS | $1.25 | $1.28 | -$0.03 | $0.21 | +$1.04 |
Risks
MD&A states Salesforce continues to experience elongated sales cycles, additional deal approval layers, and deal compression due to macroeconomic factors and measured customer buying behavior. Slower new and renewal business could pressure remaining performance obligation, revenues, and the ability to meet guidance and long-term targets.
Salesforce is embedding generative AI across products, including Einstein GPT, and the filing warns of accuracy, bias, toxicity, privacy, security, data provenance, and copyright risks, plus emerging regulation and higher compute costs that could harm adoption and margins.
Customers may renew for fewer subscriptions, shorter contract lengths, or lower-cost offerings; attrition excluding Slack was about 8.0% as of October 31, 2023. Salesforce also has less experience forecasting renewal rates for term license sales from MuleSoft and Tableau.
The Restructuring Plan reduced the workforce by about 10%, with marketing and sales headcount down 18%, general and administrative headcount down 20%, and research and development headcount down 4% since October 31, 2022. This may impair the ability to attract, retain, and motivate key employees and maintain corporate culture.
Periodic changes to the sales organization, including those associated with the Restructuring Plan, can be disruptive and have in some periods reduced productivity, which could negatively impact growth rate and operating results.
Gains or losses on strategic investments, net were a loss of $242 million for the nine months ended October 31, 2023, driven by $355 million of impairments on privately held equity investments. Volatility in this portfolio could materially affect financial results.
As of October 31, 2023, Salesforce had $9.4 billion carrying value of senior unsecured debt, with $1.0 billion of 2024 notes due in the next 12 months, plus $4.8 billion of lease commitments and $17.5 billion of other commitments. Covenants or refinancing risks could affect liquidity and cash flows.
Salesforce continues to evaluate and may make acquisitions, and the filing lists integration risks including failure to achieve expected benefits, security vulnerabilities in acquired products, retention of acquired employees, and antitrust scrutiny. Slack integration and term license revenue forecasting add complexity.
The enterprise applications market is intensely competitive, with competitors that may have greater resources, broader suites, or free or bundled offerings. Salesforce may face pricing pressure, longer sales cycles, and slower adoption, especially as it expands AI offerings.
Evolving privacy, AI, cross-border data transfer, and industry-specific regulations, including GDPR, CCPA/CPRA, the EU Digital Services Act, and California climate disclosure requirements, may increase compliance costs and liability. AI offerings face additional regulatory and reputational scrutiny.
Foreign currency fluctuations positively impacted revenue by approximately 1% in the three months ended October 31, 2023 and positively impacted current remaining performance obligation by approximately 1% as of October 31, 2023. Geopolitical events, including the war in Ukraine and the Israel-Hamas war, add further uncertainty.
SaaS KPIs
All quarters →Free cash flow
Non-GAAP operating margin
Billings and other
Current Remaining Performance Obligation
Remaining Performance Obligation
Summary, forecast, risks and KPIs are extracted from Salesforce, Inc.'s SEC filings for Q3 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.