Salesforce (NYSE: CRM) had another great quarter that beat analyst estimates. It is also showing good progress on its focus on the international markets. The only blemish is the miss on the fourth quarter earnings forecast.
Salesforce’s third quarter revenue grew 25% over the year to $2.68 billion, above analyst estimates of $2.65 billion. Net income was $51.4 million, or $0.07 per share. Adjusted EPS of $0.39 was ahead of analyst estimates of $0.37.
Deferred revenue at the end of the quarter was $4.39 billion, an increase of 26% and 24% in constant currency. Unbilled deferred revenue, representing business that is contracted but unbilled and off balance sheet, was $11.5 billion, up 34% at the end of the third quarter.
By segment, revenues from Subscription and Support grew 25% to $2.49 billion. Professional Services and Other revenues were $194 million, an improvement of 205 over the year.
Within the Subscription and Support segment, Sales cloud continued its strong growth at 17% to 906.5 million. Service cloud accelerated at 25% this quarter to $738.1 million. Salesforce platform grew 34% to $495.3 million. Marketing cloud including commerce cloud grew 40% to $346.2 million.
The company’s international focus is paying off. Revenue from Americas grew 18% to $1.9 billion while Europe grew 46% to $493 million and Asia Pacific grew 24% to $258 million. However, Americas still accounts for 72% of total revenue (compared to 74% a year ago) while Europe and Asia Pacific account for 18% and 10%, respectively. There is still a lot of room for growth. For Microsoft and Oracle, over 50% of revenue is from international markets.
For the fourth quarter, Salesforce forecast revenue of $2.8-$2.81 billion and an EPS of $0.32-$0.33. Analysts forecast revenues of $2.79 billion and EPS of $0.34.
For the current fiscal year 2018, the company increased its outlook to revenue of $10.43 -$10.44 billion, up 24% and ahead of analyst estimates of $10.39 billion. EPS is expected to be $1.32-$1.33 in line with analyst estimates of $1.32.
This will be the first year that Salesforce will go past the $10 billion annual revenue run rate. It is now eyeing to become a $20 billion cloud services company by the fiscal year 2022. The company also initiated revenue guidance of $12.45 billion to $12.5 billion for fiscal 2019.
According to IDC, the AI market will grow from nearly $8 billion in 2016 to more than $47 billion in 2020. To cash in on this growth, Salesforce released its AI platform called Einstein last year. In March, it announced a strategic partnership with IBM’s Watson to provide insightful analytics for businesses. Einstein already has clients like Coca-Cola that uses it for inventory tracking, Amazon Web Services (AWS) that uses it to improve its lead-to-cash time, and US Bank that uses it for customer behavior and attrition analysis and cross-sell opportunities.
Early this month, at this year’s edition of Dreamforce, Salesforce announced myEinstein that will allow admins and developers who don’t know code to build custom AI apps on Salesforce.com. It also announced updates including Prediction Builder, Bots, Data Insights, and a new data-explorer feature that are expected to be available next year.
Its stock is currently trading at $107.15 with a market capitalization of $77.4 billion. It hit a 52-week high of $109.2 just before its results announcement. It hit a 52-week low of $66.43 in December last year.
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