September 24, 2022

Bret Taylor, co-CEO of Inc., right, and Marc Benioff, co-CEO of Inc., wear bunny ears during a keynote speech at the Dreamforce 2022 conference in San Francisco, Calif., on Tuesday, Sept. 20. in 2022

Marlena Sloss | Bloomberg | Getty Images

Shares of Salesforce rose nearly 3% in extended trading on Wednesday after the enterprise software maker announced a new long-term profitability goal that showed the company’s determination to operate more efficiently.

Several cloud software companies, including Salesforce, have become less attractive to investors as interest rates have risen to respond to higher prices this year, after becoming more glamorous during the Covid pandemic, when organizations increased the use of programs that employees could use without stay in offices. .

Management teams at cloud companies have sought to regain interest by highlighting cost-saving plans and pulling back their timelines for profitability. Salesforce itself has said it will be more careful about adding talent.

The company went further on Thursday, as Amy Weaver, Salesforce’s chief financial officer, revealed new goals for fiscal 2026 at the company’s Investor Day, held in San Francisco during the Dreamforce conference. The company aims to a 25% adjusted operating margin, including future acquisitions, she said. That compares with the 20% target announced by Salesforce A year ago for its 2023 fiscal year. Adjusted operating margin was 19.9% ​​in the quarter ended July 31.

Salesforce has indicated that it intends to push customized sales and marketing spend as a percentage of revenue below 35% by 2026 through increased self-service, partner alliances and improved salesperson productivity. In marketing, the idea is to rely on proprietary marketing channels. Sales and marketing on a GAAP basis accounted for over 44% as a percentage of revenue in the July quarter.

In addition, Salesforce wants to manage general and administrative spend, partly by real estate valuation for the hybrid workplace.

Weaver reiterated the $50 billion revenue target for fiscal 2026 announced a year ago, but said that figure now takes into account $2 billion in foreign exchange fluctuations since last year’s investor day.

Shares of Salesforce hit a 52-week low on Wednesday. The company has begun buying back its own stock as part of its first share buyback program, Weaver said.

WATCH: The multiple is too high for Salesforce stock, says Jim Cramer

The multiple is too high for Salesforce stock, says Jim Cramer

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