Salesforce reported record results and its operating line fell by $1m, with the whole of the increase in net income arriving underneath it
One line in these accounts did not move.
Income from operations for the three months to 31 July was $2,331m. A year earlier it was $2,332m. Between those two quarters total revenue rose by $1,109m, to $11,345m from $10,236m, and Salesforce opens its release by calling the period record second quarter results. Operating income fell by $1m.
Everything that changed sits below that line. Interest expense went to $473m from $67m. Gains on strategic investments, net, came in at $2,613m, against $6m in the same quarter last year. Other income fell to $81m from $135m. Income before tax was $4,552m against $2,406m, and after a tax provision of $1,026m net income was $3,526m against $1,887m.
What carries the 119 percent
The highlights lead with GAAP diluted earnings per share of $4.29, up 119 percent year over year, and two things carry it.
The first is that investment line. The release explains in its non-GAAP definitions that the company records all fair value adjustments to equity securities held in its strategic investment portfolio through the statement of operations, that it cannot forecast future gains and losses and therefore assumes no change to the portfolio in its guidance, and that the line is included in its financial statements under generally accepted accounting principles. The increase in income before tax was $2,146m. The investment line on its own was $2,613m.
The second is the denominator. Diluted shares used in the calculation fell to 821m from 962m, a reduction of 141m, over a period in which the company has been working through a $25bn accelerated share repurchase it says will settle finally in October.
Non-GAAP diluted earnings per share was $5.90, up 103 percent. GAAP operating margin was 20.5 percent against a non-GAAP operating margin of 34.1 percent.
The raise, decomposed by the company
Salesforce raised full-year fiscal 2027 revenue guidance to a range of $46.1bn to $46.4bn. It also published the arithmetic of the $200m raise, which is unusual and useful: $100m of organic growth, $200m from the pending acquisitions of Contentful and Fin, and a $100m currency headwind.
Neither acquisition has closed. The company says both are now expected to close independently in the coming weeks, during the third quarter, that they are built into every updated metric except cRPO, and that the guidance is conditional on those closings. Third quarter cRPO growth is guided at approximately 14 percent and excludes them entirely.
Current remaining performance obligation was $33.5bn, up 14 percent. Total remaining performance obligation was $66.3bn, up 11 percent. Subscription and support revenue was $10,820m, of which the company attributes $440m to Informatica. Operating cash flow was $1.3bn and free cash flow $1.1bn. Dividends of $364m were paid in the quarter.
Over six months the same shape holds and is larger. Income from operations was $4,678m against $4,274m, an increase of $404m. Gains on strategic investments, net, were $3,171m against a loss of $57m.
