Salesforce beat expectations for its Q4 and full-year earnings and the market responded positively to the news. Analysts had predicted a profit of $0.75 a share and $7.24 billion in revenue. It beat both with $0.84 per share profit and $7.33 billion in revenue. Revenue is also increasing, with Q1 revenues expected to reach $7.37-$7.38 bn, again, above expectations.
Marc Benioff, Chair and Co-CEO of Salesforce, commented: “We had another phenomenal quarter and full-year of financial results. As we continue to see tremendous demand from customers, we’re raising our FY23 revenue guidance to $32.1 billion at the high-end of range, with non-GAAP operating margin of 20% and operating cash flow growth of 22% year-over-year.”
Salesforce is also maintaining its growth rate. Q4 revenues were up 26% year over year. It reported full-year revenues of $26.49 bn, up 25% year over year. It is also building up another war chest for acquisitions with an operating cash flow of $6 billion.
Amy Weaver, President and CFO, commented: “Fiscal 2022 was a remarkable year for Salesforce. I am particularly pleased with our focus on discipline and profitable growth, which drove record levels of revenue, margin, and cash flow. I’m confident in the momentum of the business as we build an even stronger company in FY23 and beyond.”
After hours the Salesforce share price jumped to its highest level fluttering $216 and $217 after closing at $208.89.
Behind the numbers
The transition from Marc Benioff to Bret Taylor continues. During the analyst call, Benioff spoke more as a chair than CEO. He talked briefly about the war in Ukraine, his connection to the country and that of Salesforce. He revealed that Salesforce is already supporting humanitarian help via the World Central Kitchen.
Benioff also spoke of COVID and believes the world is now entering the post-pandemic phase, despite Omicron. He spoke about how Ford is leveraging Salesforce 360 to transform its business, supporting its electric vehicles.
While Benioff gave the highlights, Bret Taylor, Co-CEO, gave the detail behind the results. Growth is occurring across all regions. In Q4, Americas grew 23%, EMEA 38% and Apac 20%. The components of Salesforce 360 also showed growth.
- Sales Cloud grew 17% to $6bn in Q4
- Service Cloud grew 18% to nearly $6.5bn
- Marketing Cloud and Commerce cloud grew 20% in the quarter
- Tableau and Mulesoft grew 23.5% in Q4
Taylor did not split out the figures from the last four mentioned. On Slack’s growth, he said: “Slack continues to exceed our expectations that I think is benefiting not only from the trend towards this new way of working that we’re all figuring out right here in Salesforce Tower, it’s also benefiting being a part of our Customer 360 portfolio. And you heard it in the customer stories, and it’s why Slack’s Q4 revenue was $312 million, well ahead of our guidance of $285 million.”
He also noted that “the number of customers spending $100,000 annually with Slack increased by 46% year-over-year.” (Source: Seeking Alpha)
Enterprise Times: What does this mean
Salesforce is showing no signs of slowing. Maintaining this growth rate is almost unprecedented for a company of this size. However, Gavin Patterson perhaps gave an insight into why it is happening. He noted: “Digital transformation has become a CEO priority. This is one of the changes over the last 2 or 3 years. It’s no longer delegated to the IT Department.”
“When it comes to Customer 360, what we often find is what they like about our Customer 360 is they’ll start maybe with Sales Cloud and then add Service, add Analytics, add Commerce. They’re building it as they go along. They might not necessarily buy all of it to start with, but they know we’ve got a solution for them as they expand and want to get more of a complete view of their customers.”
Before Customer 360, Salesforce would sell CRM (Sales Cloud) or Marketing Cloud. Now it has closely interconnected solutions on a platform, organisations naturally expand their Salesforce footprint.
Looking to the future, could Salesforce soon be ready to purchase an ERP solution to complete its business solution? The problem is that there is no obvious choice. FinancialForce is the most likely candidate on Force.com, but it does not yet have the internationalisation or scale that Salesforce would require.
Outside of its platform, could it combine with Workday? The two work closely together already, but this merger has significant barriers. Regardless, Salesforce shows no sign of stopping its growth trajectory and is winning a greater share of enterprise customers from many other larger tech firms.
