The 2016 forecast by Salesforce.com Inc. Chief Executive Marc Benioff (pictured) that his company would reach $20 billion in annual revenues by 2020 struck many people as pretty audacious at the time. Not anymore.

With another blowout quarter under its belt and no meaningful competition on the horizon, the company now believes it can record as much as $23 billion in annual sales within two years, Chief Financial Officer Mark Hawkins told analysts on today’s fiscal first-quarter conference call.

Indeed, there’s little evidence of any slowdown in sight for the customer relationship management giant. Quarterly revenue jumped 22 percent, to $3.01 billion, from a year ago, easily surpassing Wall Street estimates of $2.94 billion. Earnings of 74 cents per share blew past consensus estimates of 46 cents. Salesforce raised revenue expectations for the full year to $13.1 billion, well ahead of the $12.54 billion it estimated just three months ago.

Investors responded enthusiastically after-hours, bidding the company’s shares up more than 4 percent. The stock price is up 40 percent this year. “We think the story remains intact and investors are likely to look past the near-term profitability hit from M&A given continued growth prospects,” Mizuho Bank analyst Abhey Lamba said in a note to clients.

“We had a terrific fiscal 2018 and that momentum carried forward into Q1,” said Keith Block, Salesforce’s president and chief operating officer. The company initiated a new metric – “remaining transaction price” – that represents future revenues that are under contract but not yet been recognized. That totaled $20.4 billion at the end of the quarter, up 36 percent year-over-year. Operating margins climbed from 13.8 percent a year ago to 17 percent this quarter, indicating the the company is having success balancing growth and profitability.

Spreading the wealth

Salesforce has at times been criticized for being too reliant upon its Sales Cloud cash cow, but the latest round of earnings indicate it is seeing success in its efforts to diversify into a more all-encompassing sales and marketing platform. Combined Marketing Cloud and Commerce Cloud revenues climbed 41 percent, while Service Cloud sales jumped 29 percent to complement 16 percent growth in the core Sales Cloud platform. Service Cloud is now nearly as big as the company’s flagship product.

That’s important as Salesforce strives to become a complete platform for managing the customer experience, Block said. “This notion of the 360-degree view of the customer is the Holy Grail, and we’re the only CRM platform that can deliver on that,” he said.

Product-line diversification “typically results in increasing competitive complexity, but Salesforce seems to be handling those issues successfully,” said Charles King, president and principal analyst at Pund-IT Inc.

Efforts to diversify globally are also paying off, with Asia/Pacific revenues growing 30 percent in the quarter on a constant-currency basis and Europe/Middle East/Africa sales jumping 31 percent.

Salesforce is also moving to quiet critics who say it overspends on sales and marketing in order to maintain growth. Cost of revenues rose 18 percent in the quarter, well below the growth in the top line. Growth-oriented investors “remain satisfied so long as share price continues to grow, but it can quickly become ugly when a business begins stagnating,” King said. “So far that hasn’t been a problem for Salesforce.”

By most accounts, the company is growing its dominance in a CRM market that Gartner Inc. says is the fastest-growing enterprise software segment, with a 13.8 percent compound annual growth rate through 2022. “We are vastly outstripping the market in terms of growth,” Block said, claiming that Salesforce grew its market share over the past year at a higher rate than its top 20 competitors combined.

“We have become very strategic to customers,” he said. “As they think about the future relationship with their customers, they trust us to help them.” The company said 83 percent of Fortune 500 companies and 97 percent of Fortune 100 companies now use one or more of its products.

“Absent some kind of major downturn or cross-market contraction, I expect Salesforce will continue to find new gold in what many consider to be the well-worked-over mines of CRM,” King said.

Salesforce is particularly bullish on its March acquisition of integration provider MuleSoft Inc. for $6.5 billion. Although MuleSoft’s annual revenue of $315 million isn’t material to the parent company’s results, Salesforce has said that MuleSoft buys it critical integration capabilities with customers’ existing software. “Integration is a strategic priority for customers,” Block said. “It unlocks the clock speed of innovation.”

Benioff used the earnings call to put a stake in the ground on the issue of customer privacy, which has been a top-of-mind concern with the implementation of the General Data Protection Regulation in Europe. “We’re seeing startup companies that think customer data is theirs,” he said. “The Europeans have flipped the coin to pivot back to the customers. We need a national privacy law in the U.S. that looks a lot like GDPR.”

One analyst noted that Salesforce could actually benefit from such rules if they limit online advertising and companies veer more toward marketing technology such as Salesforce’s.

“Marketers have far too often bombarded consumers with invasive data tracking and advertising on digital devices,” Pivotal Research Group analyst Brian Wieser wrote in a note to clients, citing Facebook’s Cambridge Analytica episode. “We think that these incidents and growth in direct-to-consumer brands have caused many traditional marketers to focus on investing more heavily in the digital experiences they offer consumers, deepening their first-party relationships,” he said. “This trend should cause marketing tech companies to benefit on an ongoing basis, sustaining growth rates for companies including Salesforce.com for many years to come.”

Image: JD Lasica/Flickr