Please ensure Javascript is enabled for purposes of website accessibility

Salesforce.com Q2 Earnings: 3 Must-See Takeaways

By Daniel Sparks – Aug 26, 2021 at 8:45AM

Key Points

  • Revenue and earnings both came in ahead of analyst estimates.
  • Salesforce lifted its full-year outlook.
  • Management says organizations' digital transformations continue to accelerate, creating significant demand for Salesforce's solutions.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Better-than-expected financials and a rosy outlook from management show why investors love Salesforce so much.

As it usually does, software-as-a-service company Salesforce.com (CRM -1.66%) posted quarterly financial results ahead of analyst estimates. The robust quarter showed a company benefiting from broad-based momentum from its core customer relationship-management software to other services like data integration. Importantly, the tech company's strength is expected to persist, as Salesforce management provided an optimistic outlook for the full year.

Here's a closer look at the quarter and the catalysts powering Salesforce's business higher.

A digital-looking cloud.

Image source: Getty Images.

Strong revenue growth

Salesforce's revenue grew 23% year over year to $6.34 billion. Analysts, on average, were expecting revenue of $6.24 billion. 

Noting that this was the company's "fifth phenomenal quarter in a row" as organizations' digital transformations continue to accelerate, Salesforce CEO Marc Benioff said that "Salesforce has never seen better execution or greater momentum."

Though revenue did increase at the same percentage rate as it did in fiscal Q1, it was an acceleration when adjusted for constant currency in both quarters. Revenue rose 23% year over year in constant currency in fiscal Q2, up from 20% growth in constant currency in the prior quarter.

Of course, the period did benefit from owning workplace collaboration software-specialist Slack for over a week before the quarter ended. Salesforce closed its acquisition of Slack on July 21. The software-as-a-service specialist's fiscal second quarter ended on July 31.

Management lifted its revenue outlook

With such strong momentum, Salesforce lifted its revenue guidance. Management now expects full-year fiscal 2022 revenue to be between $26.2 billion and $26.3 billion -- up from a previous forecast for $25.9 billion to $26 billion.

Accompanying this improved revenue outlook, management gave its earnings guidance a huge facelift, guiding for non-GAAP (adjusted) earnings per share (EPS) to be between $4.36 and $4.38, up from a previous view for adjusted EPS between $3.79 and $3.81.

Slack is already outperforming

A small but notable portion of Salesforce's revenue outlook comes from stronger-than-expected sales momentum from Slack. Management said its full-year guidance includes an estimated $530 million in revenue from Slack, up from a previous expectation for $500 million. The new business is performing exceptionally well, with revenue growing 39% year over year on a stand-alone basis during the period, management said in Salesforce's earnings call.

Given this strong overall performance from Salesforce, management was thrilled with the company's momentum and was optimistic about its potential. "We exceeded our financial expectations in the quarter, achieving record levels of new business, and saw strong demand across our portfolio," said Salesforce CFO Amy Weaver in the company's fiscal second-quarter earnings release. "And we are excited to build on Slack's momentum with the power of our two companies now together."

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Salesforce.com. The Motley Fool has a disclosure policy.

Stocks Mentioned

Salesforce Stock Quote
Salesforce
CRM
$144.56 (-1.66%) $-2.44

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.