Salesforce Expects Another Year of Double-Digit Growth

A lot was riding on Salesforce.com's (CRM -1.64%) fourth quarter of its 2019 fiscal year (the period ended January 31, 2019). Shares surged 34% during the period and kicked off the new year with another double-digit advance. Though the enterprise software company is already by far the largest of its kind out there -- Salesforce's market cap is currently $120 billion -- revenue is still expanding at a fast double-digit clip.

Salesforce didn't disappoint, topping its own estimates (per usual) with 26% and 49% year-over-year revenue and adjusted earnings expansion, respectively. With the new year under way, Co-CEO Marc Benioff and friends see the good times continuing to roll for some time.

Some full-year perspective

It was a big year for Salesforce. The company has kept its foot on the gas, investing in new services and acquiring numerous peers to add to its ever-expanding ecosystem of cloud-based software helping businesses take better care of their customers. The result? Yet another year of double-digit growth, top to bottom.

Check out the latest earnings call transcript for Salesforce.com.

Data source: Salesforce. YOY = year over year. P.p. = percentage point.

Salesforce is still expanding in-house, like in its oldest bread-and-butter sales and service cloud segments. The newer marketing and commerce cloud is going especially strong, though, in spite of competition from the likes of Shopify and Adobe Systems. Then there's the platform cloud, which includes services that help enterprises integrate all of their customer data into a single-use app -- created by last year's game-changing purchase of Mulesoft.

Data source: Salesforce. YOY = year over year.  

What happens next?

As impressive as 2018 was, the future is far more important than the past to fast-growing concerns like Salesforce. For the 2020 fiscal year, revenue is expected to increase at least 20% to $15.95 billion, although adjusted earnings aren't expected to increase at all. That's OK, because Salesforce still has the pedal to the metal. As long as revenue keeps expanding, profit growth can come later. 

Image source: Getty Images.

More notable was the guidance for even further out. Salesforce is on track to easily reach its targeted $21 billion in sales during the 2022 fiscal year, so management decided to push the limits. By fiscal year 2023, the software company is shooting for at least $26 billion in revenue from just organic growth alone.

That means $26 billion in just four years -- double the number just posted with only the businesses Salesforce is running now -- with no more acquisitions needed to get there. Of course, that doesn't mean Salesforce won't make any more purchases to integrate into its business, but it's nonetheless another ambitious goal from the top team. Is it possible? Benioff explained:

Everywhere I go, I hear the same thing. Companies are continuing to make incredible investments in their customer experience. They know they need to invest in becoming more customer-centric, more efficient, and more automated. And when they invest, they're looking to do it with companies they trust. And that's why they're looking to Salesforce. Salesforce is not only the number one CRM, but we're really their most trusted enterprise software vendor. 

So, Salesforce is looking to keep growing, not just in sales and service software, but enterprise software in general. That could be a big hint, indicating the company is looking for more ways to expand on its existing relationship. Co-CEO Keith Block explained further after describing the extensive list of big businesses that already use Salesforce in some way:

We're thrilled that today, 96% of the media and communications companies from the Fortune 500 are our customers. And this is just the beginning. I recently spoke with the head of one of the largest consulting firms who said that roughly 85% of their top-50 customers are just getting started on their digital transformations. So, clearly, that's an indication that we have tremendous runway ahead of us. 

In short, there's no reason to doubt Salesforce will reach its aspirations. It has repeatedly done so in the past, and businesses and software developers are still flocking to its ecosystem. With momentum at its back and a highly profitable business model to fund its goals, Salesforce clearly isn't hype. The software giant looks like it will continue to gobble up market share and advance the digital evolution for some time to come.