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Salesforce's Benioff: The market 'doesn't fully appreciate how committed we are to growth and margins'

·Anchor, Editor-at-Large
·2-min read

Salesforce Chair and Co-CEO Marc Benioff and his team are serious about expanding profit margins after years of making big acquisitions of Mulesoft, Tableau, and Slack.

"For us, I think that the market doesn't fully appreciate how committed we are to growth and margins," Benioff told Yahoo Finance Live at the software giant's Dreamforce conference in San Francisco before reeling off several recent initiatives by the company.

Benioff also didn't rule out making large deals in the future, echoing the sentiment of Salesforce Co-CEO Bret Taylor, but he did point to two ambitious targets the company announced at the conference.

Salesforce committed to a 25% operating margin by calendar year 2025, the first time Salesforce has committed to a public operating margin target. If hit, it would mark a notable increase from 2022's goal of 20.4%.

Marc R. Benioff, Chairman and Chief Executive Officer of Salesforce, Member of the Board of Trustees of World Economic Forum, reacts as he attends the World Economic Forum (WEF) annual meeting in Davos, Switzerland, January 23, 2018. REUTERS/Denis Balibouse
Marc R. Benioff, Chairman and Chief Executive Officer of Salesforce, Member of the Board of Trustees of World Economic Forum, reacts as he attends the World Economic Forum (WEF) annual meeting in Davos, Switzerland, January 23, 2018. REUTERS/Denis Balibouse

The company also expects sales to hit $50 billion by 2025, a huge increase compared to Wall Street estimates of $31 billion for this year.

“We want to grow our revenues,” Benioff said. “We want to increase our margins. We want to increase our market share. We want to increase our levels of customer success. We want to bring people together. It’s all related.”

Overall, investors on the ground at the conference responded positively to the news.

"A quickening pace of innovation on the product side, more detailed views of large opportunities within the customer base, strong commitments to improving efficiency, and a rising focus on shareholder value point to a durable 25%+ EBIT CAGR and work to improve investor confidence in those targets," Morgan Stanley Analyst Keith Weiss wrote in a note to clients.

Salesforce showed "solid progress down the road to rebuilding investor credibility," Weiss added. "At the 2022 investor day, the Salesforce management team took investor debates head on, well addressing core areas of concern."

Weiss reiterated a buy-equivalent Overweight rating on Salesforce stock with a $273 price target.

Goldman Sachs analyst Kash Rangan also struck an upbeat note on Salesforce following his time at Dreamforce. The analyst predicts Salesforce's operating margins could break through 30% by calendar year 2026.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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