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Salesforce.com Resolutely Marches Towards $20 Billion Milestone

Posted on Friday, Jun 8th 2018

Salesforce.com (NYSE: CRM) is a horse that just keeps giving. It recently released its first quarter results, and unsurprisingly, the results shot past market expectations. The market was pleased and it sent the stock to record-high levels.

Salesforce’s Financials

For the first quarter of the year, Salesforce’s revenue grew 25% over the year to $3.006 billion, above analyst projections of $2.94 billion. Adjusted EPS of $0.74 shattered the market’s expected earnings of $0.46 per share.

By segment, subscription and support revenues grew 27% to $2.81 billion, and professional services and other revenues grew 4% to $196 million. Within the subscription segment, sales cloud revenues grew 16% to $965 million, service cloud revenues grew 29% to $848 million, salesforce platform and other revenues increased 36% to $575 million, and marketing and commerce cloud revenues grew 41% to $422 million.

For the current quarter, Salesforce forecast revenues of $3.22-$3.23 billion with an adjusted EPS of $0.46-$0.47. The market was looking for revenues of $3.11 billion for the quarter with an EPS of $0.52.

Salesforce expects to end the year with revenues of $13.075-$13.125 billion. It had earlier forecast the year’s revenues at $12.6-$12.65 billion. $300 million of this increase in forecast was attributed to the acquisition of MuleSoft. The market expected Salesforce to post $12.73 billion in revenues with an EPS of $2.12 for the year.

Salesforce reaffirmed that it was on track to reach $20 billion in revenues by 2022, and will become the fastest enterprise software company to cross that mark. According to a recent survey, the recent $6.5 billion acquisition of MuleSoft has something to contribute to that goal. The survey revealed that 59% of technology C-level executives said they planned to invest more with Salesforce on integration projects following its acquisition of MuleSoft, a leading player in the Applications Programming Interface market.

Salesforce Acquisitions

Besides MuleSoft that Salesforce acquired earlier this year, it also added other smaller players to its family. It announced the acquisition of Chicago-based CloudCraze, a leading B2B commerce platform built natively on Salesforce. Salesforce plans to leverage CloudCraze capabilities and offer its customers the same branded commerce experiences for business buyers that they do for consumers, all on a single platform. It will also help Saleforce improve its Quote to Cash offering and make it a more relevant competitor for Apttus. Terms of the deal were not disclosed. Prior to the acquisition, CloudCraze had raised $30.6 million, primarily from Insight Ventures and Salesforce Ventures.

Questions for the Salesforce Board

Besides the cloud, Salesforce is now counting on AI to continue to drive its growth. Its AI engine Einstein was launched in 2016, to help businesses manage their relationships with customers. Within two years, Einstein has become a force to be reckoned with. According to the recent quarterly results, Einstein is now powering more than 1 billion AI-driven predictions to customers every day. The addition of MuleSoft will just add to Einstein’s powers as it will not only have the ability to access data across organizations, but also get insights into some big names like Coca-Cola, GE, AT&T, and Airbus.

Salesforce clearly knows how to leverage the unprecedented opportunity within SaaS. I would like to know what is it planning to acquire next to expand the AI capabilities in particular?

The stock this week hit a 52-week-high level of $135.71 and is currently trading at $132.91 with a market capitalization of $98.7 billion. It has been steadily climbing from the 52-week low of $83.55 in June last year.

Photo credit:  Seesmic.com/Flickr.com.

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