In a comparison of two leading cloud-based customer relationship management (CRM) service providers, Salesforce (NYSE: NYSE:CRM) and Veeva Systems (NYSE: NYSE:VEEV), the former has outperformed the latter this year with a stock price rally of 65% compared to Veeva's 36%. This comes despite a slowdown in Salesforce's revenue growth, which rose by 25% in fiscal 2022 and 18% in fiscal 2023, but is expected to grow only by 11% in fiscal 2024.
The deceleration in Salesforce's revenue growth can be attributed to macroeconomic headwinds that prompted large companies to curtail spending on Salesforce's services. Other contributing factors include the lapping of several major acquisitions, including Tableau in fiscal 2020 and Slack in fiscal 2022, as well as intense competition from Microsoft (NASDAQ:MSFT), Oracle (NYSE:ORCL) SAP, and Adobe (NASDAQ:ADBE) across the slowing CRM market.
In response to the cooling growth and pressure from activist investors, Salesforce has taken measures to boost its operating margins and profits. It laid off about 10% of its workforce and cut costs across the board. These efforts are expected to increase its adjusted operating margin to 30% in fiscal 2024, up from 22.5% in fiscal 2023 and 18.7% in fiscal 2022. The company also launched its first buyback plan last year and has repurchased $4.1 billion in shares in the first half of fiscal 2024. As a result of this disciplined spending, Salesforce expects its adjusted earnings per share to grow by 53% to 54% for the full year.
On the other hand, Veeva Systems experienced a slowdown as its larger clients downsized their sales teams and focused on larger R&D deals. Its revenue rose by 26% in fiscal 2022 and 16% in fiscal 2023, but it anticipates only a 10% growth in fiscal 2024. Despite the challenging macro environment, Veeva maintains a neutral outlook and isn't aggressively cutting costs like Salesforce. It expects its adjusted operating margin to be at 5% for the full year, down from 38.5% in fiscal 2023 and 41% in fiscal 2022.
However, Veeva anticipates that its cyclical downturn could end over the next few quarters as it projects to generate at least $2.8 billion in revenue in fiscal 2025, which would represent an acceleration with 18% growth from fiscal 2024. This projection also includes a bounce back of its adjusted operating margin to 36% in a more favorable macro environment.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.