Salesforce: Another “Blowout Quarter”

Salesforce Maintained its growth trajectory in Q4 2018 (Source: Saleforce.com).
Salesforce Maintained its growth trajectory in Q4 2018 (Source: Saleforce.com).

Salesforce announced another “beat and raise” quarter last week with strong revenue growth across all of its clouds and regions. Their Q4 earnings hit $2.85 billion, up 24% year-over-year (21% in constant currency).  For the full year, revenues rose 25% (24% in constant currency) to $10.48 billion.  SFDC has a three-year compound average growth rate (CAGR) of 25% with revenue nearly doubling over the period.  Growth has been so rapid that their Q4 2018 revenue was more than their full FY 2014. 

Salesforce  claims it was the fastest enterprise software company to reach $10 billion in revenue and will be the fastest to hit $20 billion.

CEO Marc Benioff attributed ongoing growth to a number of factors including its sales team which drove a “blowout quarter,” lauding the “performance of that organization and their acuity.”  Other factors included a growing set of CEO-level relationships, an “incredible increase in investment activity” fueled by the recent US corporate tax cuts, and digital transformation: 

It doesn’t matter if they’re a consumer product goods company CEO or financial services or retail or any industry or any geography. Every CEO is thinking about their digital transformation. And I think you and I know that every digital transformation begins and ends with the customer. 

This is very powerful. And it’s why we have so much activity in our company. Of course, we’re the number one customer company in the world. No other company in the history of the software industry has been as focused on customer-relationship management, but how companies can have a customer transformation at Salesforce. 

And this, and this alone, focus, has accelerated our growth. You can see that in the numbers. So certainly, how we finished our year in fiscal year 2018 is not where we thought we would start. We raised guidance I think almost in each and every quarter, and yet we still ended up above that. And that’s why we’ve raised again here $150 million. This is the most we’ve ever raised in the history of the company, because we’re just ahead of where we thought we would be

So, we are, obviously $10 billion is now behind us, and $20 billion is ahead of us. And it’s our dream, we’re going to be the fastest to $20 billion. 

But when you have $20 billion already on and off the balance sheet, you know that that is – we’re a huge step on the way there. So that’s what I couldn’t be more excited about the position the company is in, its competitiveness, its ability to perform, the quality of its customer relationships, the quality of the products, the integration of the acquisitions, the culture, Fortune number 1 best place to work. All of these things have come together in just a really beautiful way, and I’m extremely grateful.

Salesforce has several other factors fueling its growth: The annual Dreamforce event drew 170,000 attendees last year, the firm has a clear social mission that resonates well with millennial employees (and now decision makers), and it was an early mover into cloud computing, mobile-first design, IoT, partner ecosystems (AppExchange), and artificial intelligence. 

Finally, being cloud only, the firm does not have to fight a rear-guard action to retain enterprise clients as they migrate to the cloud.  So while SAP and Oracle must fight to retain their customer base as companies make the leap to the cloud, Salesforce is there to poach their new clients.

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