Salesforce.com (NYSE:CRM) hit another quarterly earnings report out of the park and laid to rest some of the debate surrounding its core business. Worry has mounted that growth is slowing when excluding the pending acquisition of Slack (NYSE:WORK) from the equation.

However, revenue and free cash flow increased 23% and 99% year over year, respectively, to $5.96 billion and $3.23 billion in the first quarter. Even better was the updated guidance for full fiscal-year 2022 (the 12-month period that will end in Jan. 2022) that shows the company's core business is again expected to grow over 20%.  

Lowered Slack guidance is just fine for Salesforce

Specifically on that full-year guidance, Salesforce upgraded its expectations for revenue to be $25.9 billion to $26.0 billion this year (was about $25.7 billion before), a 22% increase from fiscal 2021. Also of note for those focused on the bottom line, adjusted earnings per share are expected to fall between $3.79 and $3.81 (previously a range of $3.39 to $3.41).

A large group of people wearing business formal attire.

Image source: Getty Images.

There has been concern, though, that Salesforce's results for the current fiscal year are getting obscured by the addition of Slack. The argument goes that if you strip the remote work software firm out of the equation, Salesforce's existing business is showing signs of a big cool-off. For the record, its revenue growth trajectory has never dipped below an annualized rate of 20%. The company has made plenty of acquisitions over the years to boost its rate of expansion, but Slack is by far the largest one to date at about $28 billion

But Salesforce's recent update shows its core businesses are doing just fine. Slack's contribution is now expected to be $500 million, down from $600 million previously (because Salesforce now expects the deal to be finalized very close to the end of the second quarter, slightly later than before). However, the fact that overall revenue estimates got upgraded implies the rest of the business is accelerating as effects of the pandemic ease and organizational spending on digital transformation is ramping up again. After all, $500 million is a small number for Salesforce, representing less than 2% of full-year revenue. Backing out Slack, the company's existing software suite is on track to hold on to its 20% full-year growth record.

Salesforce Product Segment

Revenue for Three Months Ended
April 30, 2021

YoY Change

Sales

$1.39 billion

11.5%

Service

$1.51 billion

20.3%

Platform and other (including Tableau and MuleSoft)

$1.75 billion

28.1%

Marketing and commerce

$895 million

25.4%

Data source: Salesforce.com. YoY = year over year. 

Patience required with Slack

Now, a $100 million reduction in revenue from Slack for the back half of this year isn't the greatest news. Besides the deal closing later than previously anticipated, it implies Slack's standalone momentum may be slowing, and the company laps the bump in activity it enjoyed last year when the world went on lockdown (Slack revenue was up about 38% in the second half of fiscal 2021 to $485 million).

The real question isn't about the strength of Salesforce's core platform -- the first quarter update shows Salesforce itself is doing just fine. The concern now turns to the hefty price tag being doled out to integrate Slack -- a business that's losing some steam. A lot will ride on Salesforce CEO Marc Benioff and the top team's ability to make Slack far more powerful and profitable as part of their massive organization. And it's clear Microsoft's operating system platform is in the company's crosshairs. I, for one, think the integration of Slack will work, but patience will be required. 

In the meantime, though, Salesforce has proven once again it's a top name in the cloud computing software industry. Its platform is riding incredible momentum and has an established track record of entering new markets, both through organic development and via bolt-on acquisitions. I remain a buyer after this latest quarterly update.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.