UPDATED 18:56 EDT / NOVEMBER 27 2018

marcbenioff-jdlasica-flickr CLOUD

Salesforce.com silences doubters with another blowout quarter

Offering evidence that worries about slowing growth that emerged following its previous quarterly earnings report were just that — worries —  Salesforce.com Inc. ripped off another strong quarter today and raised its revenue forecast for fiscal 2020 to $16 billion.

Fiscal third-quarter adjusted earnings for the customer relationship management software maker of 61 cents a share easily exceeded analysts’ 50-cent estimate. Revenue rose 26 percent to $3.39 billion from $2.70 billion a year ago, beating analysts’ estimates of $3.37 billion.

Salesforce’s estimates for the upcoming fiscal fourth quarter were a little below expectations, causing the company’s stock initially to drop 3 percent in after-hours trading. However, executives explained that comparisons to last year’s fiscal fourth quarter were misleading because of last year’s unusually large number of renewals.

The company compensated by issuing a bullish forecast for fiscal 2019, with estimated earnings of roughly $2.60 per share on revenue of $13.23 billion to $13.24 billion. It also said the company should hit the $16 billion revenue mark in 2020. 

Investors liked that news a lot better. They responded by sending shares up more than 7 percent after-hours.

“Salesforce has long focused its energies on growth,” said Charles King, principal analyst at Pund-IT Inc. Citing forecasts by co-Chief Executives Marc Benioff (pictured) and Keith Block that the company will reach $23 billion in annual sales by 2022, King asserted, “Absent a major economic meltdown or global political crisis, I don’t see any reason to doubt their optimism.”
Benioff called the results “fabulous” and said  Salesforce is suffering from “ an abundance of riches” as the only supplier of separate sales, marketing and commerce suites that can also be sold as an integrated whole. That package includes professional services, the Einstein artificial intelligence engine, the Heroku platform-as-a-service and a cloud-based analytics service.
Benioff was particularly buoyant when talking about the Customer 360 service the company introduced in September, saying it exemplified Salesforce’s company’s ability to tie multiple services together.

The CEO said the Einstein artificial intelligence-driven predictive analytics program is now delivering 4 billion predictions every day, which Ray Wang, founder and principal analyst at Constellation Research Inc., said is critical to the company’s growth. “The future is not about CRM, it’s about experience management, and AI drives mass personalized journeys,” he said.

Salesforce is on the right track in focusing on integrated customer views, said Nicole France, who is also a Constellation Research principal analyst. “Salesforce already has a broad footprint across sales, marketing and customer service, which is a very strong foundation to build on,” she said. “There are plenty of growth opportunities for the vendors that can build a comprehensive customer view.”

MuleSoft Inc., the integration platform for which Salesforce paid a hefty $6.5 billion last spring, contributed $128 million in revenue this quarter. Although that’s a drop in the bucket compared with total revenue, Salesforce has emphasized that Mulesoft fills a key strategic gap in its product line by enabling linkage to legacy applications inside its customer data centers.

Although public cloud vendors have been expanding in CRMlike services over the past couple of years, they pose no clear threat to Salesforce’s dominance, King said.

“As long as Salesforce remains mindful of the threat and is vigilant in managing its own customer relationships, the company should be okay,” he said. “Throwing money at a goal is seldom the best way to achieve it. ”

Photo: JD Lasica/Flickr

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