Salesforce’s first quarter revenues grew 24% over the year to $3.74 billion,
above analyst projection of $3.6 billion. The impressive growth was attributed
to a 11% gain on cloud-based revenues that came in at $1.1 billion for the quarter.
Adjusted EPS grew 26% to $0.93, compared with the Street’s forecast of $0.63
for the quarter.
By segment, Subscription and Support revenues rose 24% to $3.5 billion.
Professional Services and Other revenues climbed 23% to $241 million. Within the
segments, Sales Cloud revenues grew 11% to $1.07 billion with revenues from
Service Cloud growing 20% to $1.02 billion and revenues from Marketing &
Commerce Cloud growing 33% to $561 million.
For the current quarter, Salesforce forecast revenues of $3.94-$3.95 billion
with an adjusted EPS of $0.46-$0.47. The market was looking for revenues of $3.93
billion with an adjusted EPS of $0.63. Salesforce expects to end the current
year with revenues of $16.1-$16.25 billion and an adjusted EPS of $2.88-$2.90.
The Street had forecast revenues of $16.13 billion with an EPS of $2.64 for the
Salesforce’s Einstein Focus
During the quarter, Salesforce continued to focus on emerging technologies to drive growth. It expanded its new services on its AI offering Einstein, which will allow users, regardless of their technical skill, to build custom AI powered apps with just a few clicks. It expanded Einstein capabilities across its entire product line and made Einstein Voice and Einstein Vision capabilities available to every Salesforce app.
Earlier this month, it announced Einstein Analytics for Financial Services, a customizable analytics solution that provides AI-augmented business intelligence for wealth advisors, retail bankers, and managers. Einstein Analytics for Financial Services delivers a customized CRM experience for financial institutions providing them with access to AI-powered insights and recommendations tailored to their role and their customers. It integrates data from Financial Services Cloud and other data sources so that users can gain access to actionable insights and predictive guidance. The solution will offer pre-built industry-specific templates such as client financial goals, deposits and fees to enable front-line wealth advisors and retail bankers to begin using analytics immediately. It will also provide access to users to build custom analytics apps and connect to external data sources to get a full view of their book of business.
Salesforce’s earnings outlook for the current quarter has been impacted by the acquisition of its non-pofit arm Salesforce.org. Salesforce.org was a reseller for Salesforce software and services focused on the not-for-profit sector. Salesforce announced plans to acquire the entity for $300 million and integrate it with a larger, new nonprofit and education vertical. By integrating the two entities, Salesforce will continue to honor and grow its philanthropic offering. It will extend those services by continuing to provide free and highly discounted software to nonprofits and education institutions around the world and investing in local communities through employee volunteering and strategic grants.
But the acquisition has resulted in a one-time accounting charge of $200 million based on the accounting standard that addresses accounting for the settlement of preexisting relationships between an acquirer and a target company. The write-down pertains to the loss that Salesforce needs to recognize for its pre-existing contractual relationship such as the reseller agreement with Salesforce.org.
Its stock is trading at $159.31 with a market capitalization of $123.4 billion. It had touched a record high of $167.57 earlier this April. The stock has climbed from the 52-week low of $113.60 that it had fallen to in December last year when most tech stocks had taken a beating.