Salesforce.com Inc. reported strong fourth-quarter financial results today, beating expectations as its business continued to benefit from the COVID-19-driven rise in remote work.

However, Salesforce’s stock plunged in after-hours trading as executives warned that its planned $27.7 billion acquisition of Slack Technologies Inc. would hurt its bottom line in fiscal 2022.

The company, which sells customer relationship management software that includes marketing, sales, commerce and service platforms, reported a profit before certain costs such as stock compensation of $1.04 per share. Revenue rose 20% from a year ago, to $5.82 billion. Wall Street analysts had forecast Salesforce to report earnings of just 75 cents per share on revenue of $5.68 billion.

Salesforce Chief Executive Marc Benioff (pictured) told investors that he was “incredibly proud” of how the company pivoted so quickly to help customers in the new pandemic-afflicted economy.

“We had a record quarter and year by innovating more and faster than ever, enabling our customers to be successful from anywhere, and becoming more relevant and strategic than ever,” he said. “And we continued to serve all of our stakeholders in a time when they needed it most.”

The bulk of Salesforce’s revenue comes from its subscription and support services, with total sales in the quarter of $5.48 billion, up 20 percent year-over-year. Professional services and other revenues rose 18%, to $340 million.

For its full fiscal year 2021, Salesforce reported subscription and support revenue rose 25%, to $19.98 billion, and professional and other revenues rose 26%, to $1.28 billion.

Salesforce’s subscription and support revenues come from its suite of CRM products, and are broken down into four segments. Of these, the Marketing and Commerce segment pulled in $900 million in revenue in the quarter, up 27%, while Service revenue came in at $1.4 billion, up 19%. Sales revenue increased 11%, to $1.4 billion, and Platform and Other revenue rose 26%, to $1.8 billion.

Salesforce has expanded its business substantially over the years, and it said its Tableau data visualization software, which it bought in 2019, made a significant contribution to the subscription and support revenue from its Platform and Other products segment.

The acquisition of Slack, which is expected to go through later this year, is also expected to provide a big boost to Salesforce. The collaboration software provider reported earnings today too, showing quarterly revenue of $250.6 million, which brings it over the $1 billion revenue run rate mark for the first time.

Slack also added 14,000 new paying customers in the quarter, a company record, ending the year with 156,000 in total. Slack’s total revenue for the year came to $902.6 million, up 43%.

“Like other market leading companies that leverage cloud for service delivery, Salesforce was well-positioned to take advantage of the business opportunities sparked by the COVID-19 pandemic,” Charles King, an analyst with Pund-IT Inc., told SiliconANGLE. “The continuing growth of Slack’s revenues suggest that Salesforce was right in pursuing and acquiring the company.”

Analyst Holger Mueller of Constellation Research Inc. was even more enthusiastic, saying that Salesforce had passed a major landmark by breaking through the $20 billion subscription revenue barrier on an annual run rate.

“A year ago it was an even race between the top three product areas with Sales, Service and Platform,” Mueller said. “Fast forward one year and Salesforce is clearly a platform company first, then a service and then a sales automation company. The acquisition of Slack will change that dynamic toward platform even further.”

Mueller said one of the main reasons for Salesforce’s success, besides the extra business it has seen thanks to the pandemic, is its good cost management. He noted that the company’s sales and marketing and general and administrative costs had grown slower than its research and development costs, which is a healthy sign for any company.

“Salesforce will need to keep investing into product, though, as it spends less than its main rival Workday on R&D compared to other costs,” he noted. “And for every organic profit dollar, it made $5 in profit from its strategic investments. That shows how well Salesforce’s venture arm is doing, but it’s not a ratio investors will want to see in the long run, as any profitable SaaS business needs to have strong organic subscription profits too.”

For the next quarter, Salesforce sees revenue in the range of $5.875 billion to $5.885 billion, ahead of Wall Street’s forecast of $5.72 billion.

But it was Salesforce’s full-year forecast that spooked investors. The enormous fee Salesforce is paying to acquire Slack meant that its guidance for the full year came up short of what Wall Street was expecting.

“We expect recent mergers and acquisitions will be a 63-cent headwind” to adjusted earnings per share, Salesforce Chief Financial Officer Amy Weaver told analysts on a conference call.

As a result, after factoring in the costs of buying Slack, the company is predicting full-year earnings of between $3.39 and $3.41 per share on total revenue of between $25.65 billion and $25.75 billion. That includes $600 million in revenue from Slack.

Wall Street had forecast much bigger earnings of $3.50 per share on lower revenue of $25.41 billion. Salesforce’s stock fell more than 4% as investors digested the news.

King told SiliconANGLE that although the cautious forecast had put off some investors, it was probably a wise decision from a strategic point of view.

“Despite the chatter about the benefits of some of the business changes inspired by COVID-19, no one really knows how enthusiastic companies will be about making some of these processes permanent,” King said. “So it’s wiser for Salesforce to be cautious today than it is to be accused of over-optimism further down the road.”

Image: Salesforce/YouTube