Salesforce Results (Image credit pixabay/Geralt) turning in 22% revenue growth in its Q2 fiscal 2023 results, Salesforce shares fell sharply before ending the day only 3.39% down (Source Yahoo). The cause for concern was the adjusted revenue guidance that fell slightly. Salesforce now expects Q3 revenues to be between $7.82 Billion to $7.83 Billion, up ~14% Y/Y. Full-year revenue guidance is now $30.9 Billion to $31.0 Billion, up ~17% Y/Y.

Revenues were slightly boosted by professional services revenues growing 35% yearly to $0.58 billion. Subscription and support revenues rose 21% year over year to  $7.14 billion.

Bret Taylor, Co-CEO of Salesforce, commented: “Our results demonstrate the strength and diversity of our product portfolio across regions, industries and segments. In this more measured buying environment, our Customer 360 portfolio is even more strategic and relevant as our customers focus on productivity, efficiency and time to value.”

Salesforce 360 also appears to be firing on all cylinders, with the three main cloud offerings growing during the quarter.

  • Sales Cloud up 15% year over year
  • Service Cloud up 14% year over year
  • Marketing and Commerce cloud grew 17% year over year
  • Data – grew 12% year over year, with MuleSoft revenues growing 15% and Tableau’s 9%.

The exceptional performer was Slack, which grew 53% year over year, adding organizations like the National Weather Service, Coursera and Mercado Libre as customers in the quarter.

Bret Taylor also explained the $10 billion share repurchase that Benioff announced: “Our capital allocation strategy is simple. We will continue to expand our free cash flow margin as we scale, we will invest in our organic innovation. We will reduce the impact of dilution, both by offsetting stock-based compensation and by maintaining a healthy balance sheet to fund any future M&A.” (Source SeekingAlpha).

Change ahead

There are headwinds, and Marc Benioff acknowledged these during the analyst call. He explained the impact of an economic downturn and currency exchange rates fluctuating wildly. Benioff commented: “Sales cycles can get stretched. Deals are inspected by higher levels of management, and all of this we began to start to see in July.

“Nearly everyone I’ve talked to is taking a more measured approach to their business. We expect these trends to continue in the near term, and we reflected this in our guidance. Given the significant impact of foreign exchange and buyers being more measured, we’re revising our fiscal ’23 revenue guidance” (Source SeekingAlpha).

However, the demand for digital transformation remains strong. As companies look to emerge from any recession, investments are not likely to stop completely. This may mean that subscription revenue falls slightly if the recession is lengthy and firms can cut user numbers following layoffs. Amy Weaver, CFO of Salesforce, noticed the first signs of slowing down within the retail, consumer goods, communications, and media sectors.

Growth will continue, though Weaver noted, “We continue to deliver disciplined, profitable growth at scale, and have a capital allocation strategy that will make us an even better-positioned company for the long term.”

Does the share buy back mean that Salesforce is not contemplating a big acquisition? Benioff said: “I don’t think that takes M&A off the table. I think that we continue to look for opportunities. We want to be able to use our cash constructively.” (Source SeekingAlpha).

Enterprise Times: What does this mean

This is yet another strong set of results from Salesforce, especially given the economic climate. While there is a note of caution, Salesforce looks like it will weather the storm. It is now very diversified geographically and no longer restricted by just the CRM market. If a recession does emerge, it will be interesting to see the impact on subscription revenues.

The recent launch of Salesforce Easy actually makes more sense now. Suppose employees from larger organisations used to Salesforce leave their firms and start a business. Is Salesforce looking to capture these leavers with this new solution? It could bring a surge of revenues from new startups that replaces some of the lost revenues from larger organisations. Importantly, because the larger firms are often tied into multi-year deals, it could increase overall revenues.


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