Salesforce announced its Q2 2018 financial results yesterday (pdf), posting a quarterly profit of $241 million, narrowly beating Reuters analyst estimates of $229 million. Despite this, shares fell a modest 1-2 percent in after-hours trading.
The software-as-a-service (SaaS) CRM giant also bypassed the $10 billion run rate figure, with CEO Marc Benioff gushing: "We had a phenomenal quarter of growth, reaching a huge milestone for the company, becoming the first enterprise cloud software company to break the $10 billion revenue run rate."
Now Benioff has his eye on the next landmark, a $20 billion run rate. During an interview on CNBC's Money Matters yesterday Benioff said: "We are on the fast track to $20 billion, and that is all that is on my mind right now, how fast we can get to 20. I have never been more excited about getting to 20, because 10 is behind me, and you always need to be looking to the future."
This has been the stated ambitious goal for the company since as far back as 2014, when Benioff hired current COO Keith Block after his firing from Oracle.
Despite being a fairly mature business at this point, Salesforce is still posting impressive quarterly revenue growth figures, up 17.4 percent for its flagship Sales Cloud to $886 million, and up 25.8 percent for total revenue to $2.6 billion.
So why the fall in stock price? It could be down to inflated expectations, as Angela Eager, an analyst at TechMarketView wrote of the results: "Despite another quarter of strong growth that nudged ahead of market expectations, it seems Salesforce cannot do enough to meet over-inflated expectations."
Eager points out that maintaining these growth levels, especially amongst heightened competition in cloud CRM from established vendors like Microsoft (Dynamics CRM), SAP (Hybris) and Benioff's old employer Oracle, will be hard to maintain.
In its latest results call, Oracle founder Larry Ellison said: "We sold more than $2 billion in cloud annually recurring revenue, this is the second year in a row that we have sold more cloud ARR (accounting rate of return) than Salesforce.com."
Benioff refuted this on Money Matters yesterday when he said: "You can see we just pounded Oracle in the quarter and you can see it in the market share numbers... that Salesforce is considerably larger than Oracle."
During the Q2 conference call Benioff also said: "Our competitors have done a horrible job in the last few years, a lot of them have really abandoned the CRM market. We've talked to the major CRM analysts, they're shocked, we're shocked at how these companies have walked out of the CRM market."
So, how does Salesforce continue to grow? Firstly the company will need to start seeing a return on its investment in its intelligent cloud suite, positioned under the Einstein brand. This was the big reveal at the company's Dreamforce conference last winter and has been incorporated into the whole Salesforce SaaS suite.
During the investor call Benioff said: "I think Einstein has hugely exceeded our expectations and from my perspective it is already a material part of our results. It is a critical part of how we differentiate against all of our competitors."
Salesforce will also continue to focus on key vertical industries, like financial services, with highly targeted CRM solutions.
Another potential issue is that Salesforce derives a massive 70 percent of revenues from its home US market. The UK remains one of its stronger overseas markets, but the company will have to improve in this area if it is to keep growing at this point.
COO Keith Block said during the investor call: "International growth continues to represent a huge opportunity for Salesforce as we march towards that $20 billion goal. We continue to make significant investments in our international go-to-market resources, operations and infrastructure to serve our global customers."
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