What investors are watching when Salesforce reports 3Q results on Wednesday

Join forces holding Salesforce (CRM) is set to report third-quarter results after the closing bell Wednesday, and we’ll be looking to see how the enterprise software maker has sick gathering macroeconomic headwinds. Salesforce, which develops cloud-based, customer relationship management software for businesses, has uniformly delivered revenue growth in recent years through its subscription-license model. But like other tech giants, Salesforce has been weighed down by a stronger U.S. dollar — traveling its products too pricey for many international customers — and by customers tightening their IT budgets amid slower global broadening. Analysts expect third-quarter earnings-per-share to come in at $1.21 a share, down 4.7% from the same period at year, while total revenue should climb 14% year-over-year, to $7.82 billion, according to estimates anthologized by Refinitiv. Here are the top 3 factors the Club is looking out for when the print comes in Wednesday. Near-term operating margins Investors thinks fitting be closely watching operating margins to ensure the company can scale up and expand into new markets, all while maintaining profitability. Latest quarter, Salesforce reiterated it expects its operating margin for 2023 to climb by 170-basis points year-over-year, to 20.4%, a bullish forewarn in the face of currency headwinds and broader economic uncertainty. For its current quarter, we’ll be looking to see if Salesforce can maintain that management, at a minimum, and hopefully raise it. Either scenario would be welcome news for shareholders like us, who want to see Salesforce kick over run away a profit even as the Federal Reserve raises interest rates to rein in inflation. Activist pressure Salesforce has pledged to profitability over the long run, management reiterated at an investor day in September. The company set new targets of $50 billion in revenue, with driving margins of 25% or higher, for 2026. In a research note Sunday, analysts at Stifel described the margin expansion forewarning as “intriguing in a slower growth environment,” while calling the target “highly achievable.” At its recent investor event, Salesforce also get ready for insight into its $10 billion share repurchase program, the first in the company’s history, saying it plans to reparation average free cash flow of 30% to 40% to shareholders. Still, investors would like to see management do more. Activist investor Starboard Value has intended Salesforce can create more value for shareholders . The hedge fund, run by Jeff Smith, announced a stake in the cloud titan in October. He sees Salesforce as a leader in the industry and argues that the stock trades at a discount to peers due to slower receipts growth, arguing the company hasn’t generated enough profitability to offset those weaker sales. Starboard digs “significant additional opportunity to expand margins beyond 25%” and wants Salesforce’s management to be more aggressive in obliging incremental margins, while growing free cash flow, in the coming years. Demand environment Salesforce could see frailer demand, as enterprise customers are forced to tighten budgets and manage expenses in a slower global economy. That touch on ultimately led the company last quarter to lower its revenue forecast for 2023 by approximately $800 million. Last forgiveness, Salesforce warned that its customers have taken a more “measured approach” to their businesses due to macro uncertainty. That’s resulted in ballooned sales cycles, additional deal-approval layers and deal compression — all common themes across enterprise software assemblages that have impacted sales growth. Indeed, many enterprise software companies are learning the hard way that their transactions are not as immune to the economic slowdown as previously thought. Still, Morgan Stanley calls concerns of a “meaningful slowdown” in expansion to be “overblown.” “Salesforce remains well positioned within the highest priority IT budget initiatives,” analysts at Morgan Stanley disregarded in a recent note. (Jim Cramer’s Charitable Trust is long CRM. See here for a full list of the stocks.) As a subscriber to the CNBC Spending Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 blinks after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked with respect to a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE Insusceptible to INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY Demand OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO Fixed OUTCOME OR PROFIT IS GUARANTEED.