Expectations were high going into salesforce.com's (NYSE:CRM) fourth-quarter earnings report. The company has a knack for providing conservative guidance that allows it to exceed its own guidance and raise its full-year forecast. Historically, the "beat and raise" has served investors well, but in this case, Wall Street simply shrugged off the results.

For the fourth quarter (which ended Jan. 31), Salesforce reported revenue of $3.6 billion, an increase of 26% year over year and 27% in constant currency. This beat the high end of management's forecasted range, which topped out $3.561, as well as analysts' consensus estimates of $3.56 billion. The bottom line was also better than expected, with non-GAAP earnings per share of $0.70, far exceeding the company's guidance and Wall Street's expectations, both at $0.55. 

The Salesforce logo above a building entrance.

Image source: Salesforce.https://brandfolder.com/salesforce

Continued solid results

Subscription and support revenue still pays the lion's share of the bills, coming in at $3.38 billion, up 26% year over year, and up 27% in constant currency. Professional services and other revenue contributes a much smaller portion, growing to $228 million, up 16% compared to the prior-year quarter.

The company saw consistently strong increases across its growing portfolio of products. Revenue from the sales cloud increased 11% year over year to $1.1 billion. Service cloud revenue grew even more, topping $1 billion, up 22% year over year. The two smallest segments enjoyed the largest percentage gains, with the Salesforce platform and other up 54% year over year to $800 million, and the marketing cloud and commerce cloud growing to $500 million, up 34% compared to the prior-year quarter.

Salesforce continued to see solid results in each of the company's geographical regions. The Americas still provides the bulk of the company's business, generating $2.581 billion, up 26% year over year. Sales in Europe, the Middle East, and Africa (EMEA) rose to $677 million, while revenue in the Asia-Pacific region (APAC) climbed to $345 million, each up 25% year over year.

The company's remaining performance obligation, which is made up of future revenue that is under contract but has not yet been recognized, surged to $25.7 billion, up 25% year over year. The portion that will be realized over the coming 12 months jumped to $11.90 billion, an increase of 24% compared to the prior-year quarter.

Great expectations?

On the conference call to discuss the results, chairman and co-CEO Marc Benioff said that for fiscal-year 2023, the company was targeting revenue of $26 billion to $28 billion, compared to the $13.3 billion achieved in 2019, effectively doubling the company's organic revenue over a period of four years. This implies a compound annual growth rate of around 20% -- a significant accomplishment for a company of this size.

Salesforce co-CEO Marc Benioff on stage.

Salesforce co-CEO Marc Benioff. Image source: Salesforce.com.

Benioff laid out three reasons why he believes this ambitious goal is achievable. First, he cited the massive and ongoing "movement to the cloud." Second, he pointed to the "digital transformation," or the growing use of digital technology to solve more traditional problems. Third, he said the process begins and ends with the customer, which is right in Salesforce's wheelhouse. Benioff said that the intersection of these three areas, the cloud, digital transformation, and the customer make customer relationship management (CRM) "the most important market in enterprise software." He believes this will work to Salesforce's advantage and help the company to achieve its lofty growth goals.

What the future could hold

Wall Street had no qualms with the numbers Salesforce produced this quarter, but seemed rather unimpressed by what it considered to be weak guidance for the first quarter. Salesforce forecast revenue in the range of $3.67 billion and $3.68 billion, up 22% year over year at the midpoint of its guidance. This fell just shy of analysts' consensus estimates of $3.7 billion. The company is also guiding for adjusted earnings per share of between $0.60 and $0.61, also below expectations of $0.63.

Salesforce is continuing to deliver in all the ways that matter and investors should avoid the temptation to view it in terms of next quarter or even next year. The company is planning to double its revenue to about $27 billion in the coming four years. That's what investors should really be excited about.