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While Tech Peers Sputter, Salesforce Sees More Growth Ahead

By Nicholas Rossolillo - Dec 3, 2018 at 5:04PM

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It seems like nothing can stop this cloud company from achieving its ambitions.

Another quarter, another beat. As businesses around the world transform operations to excel in a new digital age, cloud software provider (CRM -2.00%) is reaping huge rewards. The customer relationship management company continues to execute on its ambitious expansion mission, leaving other tech outfits in the dust. Though many corporations have been voicing concern over an economic slowdown as of late, digital transformation remains a top priority and co-CEO Marc Benioff doesn't see his company losing steam anytime soon. Let's take a look at some of what investors learned from the company's most recent earnings report and conference call with analysts.

2018 so far...

There were several developments of note in the third quarter of 2018, including Salesforce's adding Apple as a strategic partner for the first time with custom apps for iOS. Salesforce also said it renewed a relationship with one of the world's largest financial services firms (unnamed), good for an undisclosed nine-figure sum. The raw numbers speak for themselves, though. Revenue through the first nine months of the year was up 26% over the year-ago period, building on an impressive run in 2018 and helping the software provider maintain its better than 20% top-line clip that it has kept up for years.


Nine Months Ended Oct. 31, 2018

Nine Months Ended Oct. 31, 2017

YOY  Growth 


$9.68 billion

$7.68 billion


Gross profit

$7.17 billion

$5.64 billion


Operating profit

$398 million

$243 million


Adjusted earnings per share




Data source: Salesforce. YOY = year over year. 

Guidance for the fourth quarter was good, too, even though results are facing a $330 million reverse swing due to currency headwinds. In 2017, a weaker dollar overseas provided a $130 million bump, versus an expected $200 million adverse affect in the fourth quarter this year. Nevertheless, revenue is now expected to be at least $3.55 billion, and full-year revenue is expected to clock in at at least $13.24 billion -- an increase from previous guidance for at least $13.125 billion.

Benioff & Co. see another 20% to 21% rise in the top line in 2019. These numbers -- and the consistency at which the company exceeds its own expectations -- are impressive for a company Salesforce's size. But management is not surprised.

A hand holding a table from which is projected lights in the shape of a cloud.

Image source: Getty Images.

The digital economy is firing on all cylinders

When asked about conversations they're having with other executive teams about the strength of the global economy, Benioff and co-CEO Keith Block said that they can't see the economy growing much faster than it has this past year because businesses simply can't find enough people to hire. In other words, the economy is doing just fine in their opinion. Digital transformation, especially around the customer, also remains a top priority regardless of the economic ebb and flow.

Thus, Benioff said, he sees "several years ahead of good solid growth for the economy. ... We are still in the economy right now and look at these numbers that are ripping and we still see very much a huge investment focus going on." 

That should play right into Salesforce's hand. Management said new customers are buying the company's services to lead their digital transformation. Salesforce has a well-integrated platform that can help with all aspects of data management around the customer, leading to big revenue increases from new clients and from existing ones expanding their use of the cloud.


Q3 FY 2019 Revenue

YOY Increase

Sales cloud

$1.02 billion


Service cloud

$917 million


Platform and other

$742 million


Marketing and commerce cloud

$489 million


Data source: Salesforce. YOY = year-over-year.

Acquisitions made in 2018 are also doing a lot to pitch in, especially the MuleSoft addition at the beginning of the year: $105 million of the Platform segment's revenue came from MuleSoft and its data integration services. But it was noted that the lesser-known purchases of CloudCraze (business-to-business service software) and Datorama (artificial intelligence software) are also assimilating into the Salesforce family smoothly.

In short, Salesforce is showing few signs of slowing down anytime soon. The company's suite of cloud-based software is near the heart of a fourth industrial revolution: a digital movement bridging the gap between big data and the real world. With another quarter of strong performance and management predicting at least 20% growth again in 2019, it's hard not to like Salesforce stock right now.

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