Salesforce aims for 25% operating margin in 2026 Inc. Co-CEO Bret Taylor, right, and Inc. Co-CEO Marc Benioff wear bunny ears during a keynote at the Dreamforce 2022 conference in San Francisco, California , on Tuesday, September 20, 2022.

Marlena Sloss | Bloomberg | Getty Images

Shares of Salesforce rose nearly 3% in extended trading Wednesday after the business 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 being more glamorous during the Covid pandemic, when organizations increased the use of programs that employees could use without being in the offices. .

Management teams at cloud companies have tried to regain interest by emphasizing cost-saving plans and advancing their timelines for profitability. Salesforce itself said it would be more careful about adding talent.

The company went further on Thursday, as Amy Weaver, Salesforce’s chief financial officer, revealed new targets for fiscal 2026 at the company’s investor day in San Francisco during its conference dreamforce. The company is targeting an adjusted operating margin of 25%, including future acquisitions, he said. That compares with the 20% target Salesforce announced a year ago for its fiscal year 2023. Adjusted operating margin was 19.9% ​​in the quarter ended July 31.

Salesforce indicated that it intends to drive adjusted sales and marketing spend as a percentage of revenue below 35% by 2026 through increased self-service efforts, partner alliances and productivity improvements for salespeople. In marketing, the idea is to leverage proprietary marketing channels. GAAP sales and marketing accounted for more than 44% as a percentage of revenue in the July quarter.

In addition, Salesforce is eager to manage general and administrative spending, in part by evaluating real estate assets for a hybrid workplace.

Weaver reiterated the $50 billion revenue target for fiscal 2026 that he announced a year ago, but said the figure now takes into account a $2 billion headwind from exchange rates since the day of last year’s investors.

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

I WILL SEE: 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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