Investors had risen concerns over Salesforce‘s recent M&A spree, having spent a combined $3.5 billion on acquisitions in the last six months alone, according to reports.
It seems investors’ concerns may have been grounded. Salesforce released its most recent quarterly stats on Wednesday (Aug. 31) after market close, and the results weren’t great.
Shares fell 5.88 percent in extended trading after the company revealed a downgraded third quarter revenue forecast, despite a 25 percent increase in Q2 revenue. The company posted $2.04 billion revenue in the quarter, and while that narrowly beat expectations, the company saw an 18 percent drop in cash earnings between Q2 2016 and Q2 2015.
Further, according to reports, Salesforce was expected to post a $0.96 earnings-per-share target for the full year, but the company stuck with its $0.93–$0.95 target.
Still, Salesforce CEO Marc Benioff assured that Salesforce remains ahead of the competition with its 25 percent revenue increase. Revenue for the firm’s largest unit, its cloud-based sales solution, increased by 12.5 percent in the quarter.
Analysts, investors and Salesforce rivals, including Microsoft, IBM and Oracle, will be watching the company closely, however, considering the firm’s M&A spree. Analysts say the purchases are part of Salesforce’s plan to get ahead of its main rivals, which have made their own acquisitions in recent months — most notably, Salesforce lost to Microsoft in its bid to purchase LinkedIn.
But Salesforce nabbed other big-name deals — most notably, Demandware, a takeover announced in June, for $2.8 billion.
In an interview with Bloomberg, D.A. Davidson Analyst Jack Andrews said Salesforce is “trying to maintain growth — and look for new arenas.”
“You can grow organically, or you can grow inorganically,” he stated.