The sharpest growth during Salesforce.com Inc.’s fiscal second-quarter came from its suites of cloud-based marketing and ecommerce software, company executives said.
“We see CEOs investing. And top of mind for them is digital transformation, which begins and ends with the customer,” Chairman and co-CEO Marc Benioff said on a conference call last week with investment analysts, according to a transcript from Seeking Alpha.
The company breaks out revenue for four product groups, covering sales management, customer service, the Salesforce.com technology development platform, and combined marketing and commerce software. For the fiscal second quarter ended July 31, it said its revenue from its Marketing and Commerce Cloud software suites increased 36.3% year over year, as total revenue increased 22%. The company’s Commerce Cloud software is comprised of the CloudCraze and Demandware digital commerce technology platforms it acquired in recent years for B2B and retail ecommerce offerings.
Commerce Cloud in ‘Customer 360’
Commerce Cloud is also a crucial part of what Salesforce calls its Customer 360 strategy, which also uses its Einstein artificial intelligence software and MuleSoft data integration technology to help Salesforce clients better understand and interact with their own customers.
Salesforce also gave a revenue forecast that topped Wall Street’s estimates, signaling the maker of cloud-based applications will continue to see rapid growth due to an expanding product lineup and its latest acquisitions.
Revenue will be as much as $4.45 billion in the period ending in October, the San Francisco-based company said Thursday in a statement. Analysts projected $4.18 billion, according to data compiled by Bloomberg.
Benioff and co-CEO Keith Block have charted a new path for the market leader in software for managing customer relationships. This month, the company closed its biggest deal ever, buying Tableau Software Inc. for $15.3 billion and announced an agreement to acquire ClickSoftware Technologies Inc. for $1.35 billion. The Tableau purchase will take Salesforce into the analytics market and help it maintain a torrid pace of growth, even as the company turns 20 years old.
Adjusted profit will be 65 cents a share to 66 cents a share in the current period, in line with analysts’ estimates. Salesforce also increased its annual revenue forecast to a range of $16.75 billion to $16.9 billion from $16.45 billion to $16.65 billion.
Still hitting growth benchmarks
“Their guidance for the year, which includes Tableau, came in above the Street’s expectations,” said Pat Walravens, an analyst at JMP Securities. “It’s looking pretty good.”
Shares rose about 7% in extended trading after closing Thursday at $148.24 in New York. The stock has climbed 8.2% this year.
Tableau will continue to be operated as a separate brand within Salesforce. When the company announced the acquisition, Benioff said that Seattle, where Tableau is based, will become the site of Salesforce’s second headquarters.
In addition to deal-making, the software maker has expanded internationally in an effort to grow sales by more than 20% each quarter. Salesforce announced in July that it would partner with Alibaba Group Holding Ltd. to offer its cloud-based applications in China, even amid a trade war between that country and the U.S. Revenue from the Asia Pacific region increased 26% in the fiscal second quarter, the company said.
Sales in the fiscal second quarter increased 22% to $4 billion. Analysts, on average, estimated $3.95 billion. Profit, excluding some items, was 66 cents a share, compared with analysts’ average projection of 47 cents.
Daniel Elman, an analyst at Nucleus Research, said investors lowered their expectations leading into the quarter amid a general slowdown in the technology sector and concern that Tableau wouldn’t fold into the company smoothly.
“One of the things they harp on about at their conferences is that they are able to keep growing at this pace,” Elman said. “They showed they are still able to perform and meet the benchmarks they set.”
For its fiscal second quarter ended July 31, Salesforce reported:
- Total revenue increased 21.8% year over year to $3.997 billion;
- Marketing and Commerce Cloud revenue, which includes combined sales of B2B and business-to-consumer ecommerce technology, increased 36.3% year over year to $616 million;
- Revenue from Sales Cloud, the company’s flagship product that its customers use to track sales, increased 12.5% to $1.13 billion;
- Revenue from Service Cloud, customer service software, increased 21.9% to $1.09 billion;
- Revenue from the Salesforce Platform and “other” products increased 28.1% to $912 million;
- Gross profit increased 24.6% to $3.03 billion, resulting in a gross profit margin of 75.8%, up from 74.1%.
- Net income was $91 million, compared with $299 million; the decrease was due in large part to a change in provision for income taxes, plus increased expenses related to marketing and sales operations and to research and development.
For the six months ended July 31, Salesforce reported:
- Total revenue increased 23.0% year over year to $7.734 billion;
- Marketing and Commerce Cloud revenue increased 34.7% year over year to $1.18 billion;
- Sales Cloud revenue increased by 11.9% to $2.20 billion;
- Service Cloud revenue increased by 21.1% to $2.11 billion;
- Revenue from the Salesforce Platform and “other” products increased 36.3% to $1.18 billion;
- Net income was $483 million, compared with $643 million.
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