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Salesforce Now Focusing on International Markets

Posted on Friday, Sep 1st 2017

Nothing appears to be in the way of Salesforce.com’s (NYSE: CRM) growth. After another stellar quarter performance, it is fairly evident that competitors, including the likes of Microsoft and Oracle, are not coming close to this giant. Here is an interesting infographic, courtesy MotleyFool.com that shows how Salesforce has expanded its market share position in every category over the year.

Salesforce’s Financials

For the second quarter of the year, Salesforce’s revenue grew an impressive 26% over the year to $2.56 billion, above analyst projection of $2.51 billion. Revenue growth was driven by 17% growth in Sales Cloud revenues. Additionally, the company also recorded gains in billed and unbilled deferred revenue, which improved 29% compared with a three-year average of 27%. Net income came in at $17.7 million, or $0.02 per share. Adjusted EPS of $0.33 was better than the previous year’s $0.24 and the market’s forecast of $0.32. Overall, it delivered a rare feat by recording more than 20% in both revenue and margin expansion.

By segment, revenues from Subscription and Support grew 25.6% to $2.369 billion. Professional Services and Other revenues improved 28.3% to $193.1 million.

For the current year, Salesforce increased its outlook to revenue of $10.35-$10.4 billion and an EPS of $1.29-$1.31, in line with market forecasts. This will be the first year the Salesforce will go past the $10 billion annual revenue run rate. It is now eyeing to become a $20 billion cloud services company in the near future. For the current quarter, the company forecasts revenue of $2.64-$2.65 billion and an EPS of $0.36-$0.37. Analysts had forecast revenues of $2.61 billion for the quarter.

Salesforce’s International Growth

Salesforce is benefitting from the tie-ups it has established with other tech giants like Amazon. Last year, Salesforce announced plans to use AWS to run some of its software. It intends to spend $400 million over the next four years on AWS, primarily due to the wider geographic presence that the service offers. The tie-up with Amazon has helped it expand its presence in international markets of Canada and Australia. Last month, Salesforce started running its software in AWS data centers in Canada and is planning to target Australia by the end of the year. The investment will help customers, especially government and financial services organizations, feel safer about hosting data within the countries.

For Salesforce, international markets are still a lucrative opportunity. Currently, nearly 30% of its revenues are from international markets compared with more than 50% at Microsoft and Oracle.

To break into this market, Salesforce is investing heavily. More than 40% of its new hires year to date have been outside the United States. During the quarter, it added several new clients in APAC with brands like Toshiba and Nomura in Japan as well as Queensland Urban Utilities and Australia Post in Australia.

Its stock is currently trading at $95.49 with a market capitalization of $67.9 billion. It has recovered from the 52-week low of $66.43 it had reached in December last year. Earlier this week, the stock had touched a 52-week high of $95.23. Analysts expect the stock to climb higher. Canaccord Genuity increased its price target to $110 from $100 and maintained a buy rating, and SunTrust Robinson Humphreys analysts increased their price target to $114 from $110 and maintained a buy rating. Credit Suisse analysts maintained an Outperform rating on the stock and raised their price target from $110 to $115.

Photo credit:  Seesmic.com/Flickr.com.

 

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