(Reuters) - Salesforce.com Inc (CRM.N), the subject of takeover speculation for the past few weeks, raised its revenue forecast for the full year, after the cloud software company reported a profit for the first time in seven quarters.
Shares of the world's biggest maker of online sales software were up 7.3 percent in extended trading on Wednesday.
The company has struggled to earn consistent profits despite strong revenue growth over the past few years as margins waver on higher spending, including on hiring sales personnel who are vital in expanding deferred revenue.
"I think what investors will be very enthusiastic about tomorrow is how much margin upside there was," FBR Capital Markets analyst Samad Samana said.
The company reported net income of $4.1 million, or 1 cent per share, for the first quarter ended April 30 compared with a loss of $96.9 million, or 16 cents per share, a year earlier.
Revenue jumped 23 percent to $1.51 billion.
Salesforce's Service Cloud displaced SAP (SAPG.DE) to be the market share leader in customer service and support, Chief Executive Marc Benioff said on a conference call.
"Sorry about that, SAP," Benioff said.
SAP CEO Bill McDermott said on Tuesday that Salesforce was richly valued and was unlikely to be bought.
Salesforce had been approached by a potential buyer, Bloomberg reported last month. The stock has risen about 5 percent since then.
The company has been benefiting as businesses choose more cloud software services that cost less and are easier to manage.
In the first quarter, there was particular strength in Service Cloud, Salesforce's second-largest revenue source, Samana said.
"Marketing cloud, which is something they've only been doing for the last few years, was another high growth area."
Unbilled deferred revenue — a critical measure of contracts closed with business customers, but off-balance sheet — jumped 31 percent to $3.06 billion.
Excluding items, Salesforce earned 16 cents per share, beating the average analyst estimate of 14 cents.
Salesforce said it now expects revenue of $6.52 billion-$6.55 billion for the year ending January 2016, up from $6.48 billion-$6.52 billion forecast in February.
Analysts were expecting $6.51 billion, according to Thomson Reuters I/B/E/S.
Reporting by Devika Krishna Kumar and Subrat Patnaik in Bengaluru; Editing by Joyjeet Das