With a sharp rise in sales of its commerce and marketing software, Salesforce.com Inc. surpassed $13 billion in revenue for the fiscal year ended Jan. 31, the cloud-based provider of CRM and related business software said this week.
But its financial news also had a downside, as the company indicated its long-running torrid pace of growth may be slowing. For its current quarter ending in April, Salesforce projected sales within a range of $3.67 billion to $3.68 billion, slightly down from the $3.7 billion that investment analysts had expected, causing its shares to drop 3% on Tuesday.
Although those projected sales would amount to a revenue increase of 22%, it disappointed investors because it would be the smallest year-over-year gain since at least 2010. “Investors like to see an acceleration,” says Pat Walravens, an analyst at JMP Securities.
Growth in the cloud software suites
Nonetheless, Salesforce executives brushed off any issues with their company’s growth track. “We just finished an outstanding fourth quarter and we feel very, very good about the business,” co-CEO Keith Block said in an interview with Bloomberg News.
In the fourth fiscal quarter ended Jan. 31, Salesforce reported year-over-year increases in subscription and support fees for all of its main product suites. It said its Sales Cloud software for sales agents increased 11% to an annualized run-rate of more than $44.2 billion; Service Cloud grew 22% to a run-rate of more than $3.8 billion; Platform and Other software products increased 54% to a run rate of more than $3.3 billion; Marketing and Commerce Cloud increased 34% to a run rate of $2.1 billion. Marketing and Commerce Cloud includes ecommerce and marketing technology from companies Salesforce has acquired in recent years: CloudCraze, for B2B and some B2C ecommerce technology; Demandware for retail ecommerce technology; and ExactTarget for email marketing.
Marc Benioff, chairman and co-CEO, said on a conference call with investment analysts this week that Commerce Cloud, in a single day during the 2018 holiday shopping season, processed more than 4.2 million orders and supported more than 690 million ecommerce web page loads, according to a transcript of the call from Seeking Alpha.
Trend toward digital innovation
Benioff and Block also said on the call that they’re noticing many companies being more innovative in using digital technology to better serve their customers. Benioff noted that many Salesforce clients are using the Salesforce Lightning application development platform to build more customized online interfaces for their customers, using a click-and-drag feature rather than having to recode software.
Benioff noted that companies are increasing their use of Salesforce Einstein artificial intelligence technology to build online interfaces more personalized to their customers’ interests. He added that Salesforce will soon make its Einstein AI technology available in every Salesforce application, adding such features as voice-activated commands into CRM and other software.
“The power of voice isn’t just getting information, it’s getting information into your database and into your CRM system,” he said.
Block added that more companies are shifting more of their IT spending toward innovation projects as part of digital transformation. He noted that, in the financial services industry, companies have traditionally budgeted 90% of their IT spend to maintenance of existing technology systems. “Now what you see in financial services is a drive toward more of a 50-50 spend between maintenance and innovation,” he said.
For its fiscal fourth quarter ended Jan. 31, Salesforce reported, it said total revenue increased 26% to $3.60 billion.
For the full fiscal year, it said total revenue increased 26% year over year to $13.28 billion.
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