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Salesforce lifts annual forecast as business software demand stays strong

Viva Technology conference dedicated to innovation and startups at the Porte de Versailles exhibition center, in Paris

By Zaheer Kachwala

(Reuters) -Salesforce raised its annual revenue forecast on Wednesday and projected quarterly sales above estimates as it benefits from a recent price hike and resilient demand for its cloud and business software offerings in an uncertain economy.

Shares of the company rose 6% in extended trading.

The results fan optimism about a recovery in technology spending in the second half of 2023 after earnings from major cloud players including Amazon.com and Alphabet-owned Google suggested that the slowdown was nearing an end.

Salesforce has also tried to boost demand by integrating artificial intelligence into its offerings such as Slack and launching a generative AI product called Einstein GPT for salespeople, customer support agents and marketers.

The company expects revenue to be between $8.70 billion and $8.72 billion in the third quarter, compared with estimates of $8.66 billion, according to Refinitiv data. Its quarterly earnings per share forecast was also above estimates.

"We’re leading our customers into the new AI era," CEO Marc Benioff said in a statement.

Salesforce also bumped up its annual revenue forecast to between $34.7 billion and $34.8 billion, from the $34.5 billion to $34.7 billion range given in May. It also raised its full-year adjusted operating margin forecast to 30% from 28%.

Salesforce is primed to capitalize on the surge in expected AI investment over the next 12-18 months and price hikes will help offset post-pandemic headwinds, according to Third Bridge analyst Charlie Miner.

Analysts are also optimistic about the boost from the company's first price hike in seven years, which raised prices of its major offerings by an average of 9% from August.

In the second quarter, revenue came in at $8.60 billion, beating expectations of $8.53 billion. Adjusted profit of $2.12 per share also topped estimates of $1.90.

(Reporting by Zaheer Kachwala in Bengaluru; Editing by Maju Samuel)