Salesforce (CRM Quick QuoteCRM - Free Report) stock gained 3.8% in Tuesday’s extended trading session after the enterprise cloud computing solutions provider delivered better-than-expected fourth-quarter fiscal 2022 results and raised revenue forecast for the first quarter as well as for fiscal 2023.

Salesforce’s fourth-quarter fiscal 2022 non-GAAP earnings of 84 cents per share beat the Zacks Consensus Estimate of 73 cents. Quarterly earnings included a benefit of 3 cents per share from the mark-to-mark accounting of CRM’s strategic investments on a non-GAAP tax rate of 21.5%. However, non-GAAP earnings declined 19% from the year-ago quarter’s earnings of $1.04 per share.

Salesforce’s quarterly revenues of $7.33 billion climbed 26% year over year, surpassing the Zacks Consensus Estimate of $7.23 billion. The top line also improved 27% in constant currency (cc).

The company has been benefiting from the robust demand environment as customers are undergoing a major digital transformation. Thus, the rapid adoption of its cloud-based solutions resulted in the better-than-anticipated performance during the fiscal fourth quarter. Also, the recently acquired Slack business boosted revenues and contributed $308 million in total sales during the fourth quarter.

Quarter in Detail

Coming to CRM’s business segments, revenues at Subscription and Support (93% of the total revenues) increased 25% from the year-earlier period to $6.83 billion. Professional Services and Other (7% of the total sales) revenues climbed 46% to $498 million.

Under the Subscription and Support segment, Sales Cloud revenues grew 17% year over year to $1.6 billion. Revenues from Service Cloud, one of the company’s largest and the fastest-growing businesses, also improved 18% to $1.7 billion. Marketing & Commerce Cloud revenues jumped 20% to $1 billion. Salesforce Platform and Other revenues were up 53% to $1.4 billion. Also, revenues from Data increased 23% year over year to $1 billion.

Geographically, Salesforce registered revenue growth at cc of 23% in America (67% of the total revenues), 28% in the Asia Pacific (10%) and 40% in the EMEA (23%) on a year-over-year basis.

Salesforce’s gross profit came in at $5.31 billion, up 22% from the prior-year period. However, the gross margin contracted 200 basis points (bps) to 73%.

Salesforce recorded a non-GAAP operating income of $1.1 billion, up 8% year over year. However, the non-GAAP operating margin contracted 250 bps to 15% due to the lower gross margin and increased operating expenses. Operating expenses flared up 32% year over year to $5.49 billion.

Salesforce exited the fiscal fourth quarter with cash, cash equivalents and marketable securities of $10.5 billion compared with $9.39 billion recorded at the end of the previous quarter. CRM generated operating cash flow of $1.98 million in the fourth quarter and $6 billion in fiscal 2022.

As of Jan 31, 2022, the current remaining performance obligation, reflecting revenues under contract for the next 12 months, was $22 billion, up 22% on a year-over-year basis.

Guidance Update

Buoyed by stronger-than-expected results of the fourth quarter of fiscal 2022, Salesforce raised its revenue guidance for the first quarter and fiscal 2023.

For the fiscal first quarter, Salesforce now projects total sales between $7.37 billion and $7.38 billion, up from the earlier guidance range of $7.215-$7.250 billion. Furthermore, CRM anticipates non-GAAP earnings per share in the band of 93-94 cents for the current quarter.

For fiscal 2023, the company raised revenue forecast to the $32-$32.1 billion range from the $31.7-$31.8 billion range projected earlier. The updated guidance includes expected revenues from the newly acquired Slack and Traction on Demand businesses of $1.5 billion and $75 million, respectively.

The company projects non-GAAP operating margin of approximately 20% and non-GAAP earnings in the range of $4.62-$4.64 per share for fiscal 2023. It anticipates operating cash flow for fiscal 2023 to increase by 21-22% from $6 billion in fiscal 2022.

Zacks Rank & Key Picks

Currently, Salesforce carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks from the broader technology sector include Axcelis Technologies (ACLS Quick QuoteACLS - Free Report) , Apple (AAPL Quick QuoteAAPL - Free Report) and Analog Devices (ADI Quick QuoteADI - Free Report) . While Axcelis and Apple each sport a Zacks Rank #1, Analog Devices carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Axcelis’ first-quarter 2022 earnings has been revised upward by 2 cents to 89 cents per share over the past 30 days. For 2022, earnings estimates have moved north by 10.8% to $3.99 per share in the past 30 days.

Axcelis’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 30.3%. Shares of ACLS have surged 73.4% in the past year.

The Zacks Consensus Estimate for Apple’s second-quarter fiscal 2022 earnings has been revised upward by 3.6% to $1.43 per share over the past 60 days. For fiscal 2022, earnings estimates have moved north by a penny to $6.16 per share in the past seven days.

Apple’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 20.3%. AAPL stock has appreciated 33.7% in the trailing 12 months.

The Zacks Consensus Estimate for Analog Devices’ second-quarter fiscal 2022 earnings has been revised upward by 23 cents to $2.08 per share over the past 30 days. For fiscal 2022, earnings estimates have moved north by 10.5% to $8.32 per share in the past 30 days.

Analog Devices’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 6%. Shares of ADI have increased 4.7% over the past 12 months.