, inc. Earnings: Can the Cloud Pioneer Keep Growing?

Revenue keeps climbing at Salesforce, but will earnings follow suit?

May 19, 2014 at 7:10PM

On Tuesday, (NYSE:CRM) will release its quarterly report. Investors haven't been quite sure what to make of the cloud-computing pioneer's stock lately: the company has complicated relationships with larger peers in the space, with a strategic partnership with Oracle (NYSE:ORCL) that it began last year and a new relationship with Microsoft (NASDAQ:MSFT) based on Salesforce's acquisition of ExactTarget. But the biggest question Salesforce faces is whether it can make its net income grow as quickly as its revenue has risen lately.

Customer relationship management seems like a pretty simple concept. Companies want to make sure that they're treating their clients right by keeping track of how much contact they give their customers and what types of products and services those clients are most interested in. But Salesforce was instrumental in pushing CRM platforms into the cloud, and that enabled its users to manage their marketing, sales, and customer-service campaigns from across their networks without the hassle and expense of doing the network-infrastructure legwork themselves. Still, Salesforce has to keep moving forward in a rapidly evolving industry. Let's take an early look at what's been happening with over the past quarter and what we're likely to see in its report.


Stats on

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$1.21 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

How long can earnings keep growing?
In recent months, analysts have largely held steady on their views of Salesforce earnings, raising their projections for the next fiscal year by a single penny per share. The stock has given up a considerable amount of ground, though, falling more than 15% since mid-February.

Salesforce's fourth-quarter earnings report raised as many questions as it answered. Revenue climbed 37%, and the company raised its full-year revenue guidance by $100 million to $5.3 billion. Yet a substantial portion of that came from acquisitions, and operating margins fell by six full percentage points from the year-ago quarter. Moreover, Salesforce expects to continue to have trouble with profitability on an unadjusted basis well into the future, and, as a result, shares fell after the report.

Salesforce's business strategy can be hard for investors to understand, as it emphasizes sales and market-share growth over profits. Essentially, Salesforce is trying to stay ahead of Oracle, Microsoft, and other competitors by making sure that it holds onto existing clients and woos new ones into the fold, sacrificing current profitability in the hopes of establishing long-term relationships and deferring profits into future years. Yet with all the hype that cloud computing has gotten, Salesforce will eventually have to start making money, and it's unclear when that switchover will happen.

Moreover, Salesforce is aiming at global domination. The company will soon open more data centers in Europe, opening a London-based center this year and then expanding to Germany and France next year. As Europe emerges from recession, Salesforce's timing could work out well.

Yet of even more importance for Salesforce is its Salesforce1 app platform, which the company hopes to use to bolster its presence in the mobile space. With mobile devices becoming more prevalent, customer-relationship management companies have to make their offerings as accessible and convenient as possible to their clients, and Salesforce hopes to make its marketing and sales platforms the most successful in the market.

In the earnings report, watch to see how the company handles recent doubt throughout the stock market with respect to its share-price growth potential. Salesforce will have to keep proving itself in order to see its stock recover and climb back to its past highs.

The biggest thing to come out of Silicon Valley in years
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now, for just a fraction of the price you'd expect. Click here to get the full story in this eye-opening new report.

Click here to add to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Microsoft and Oracle.. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers