Salesforce Sees Increasing Demand on Expanded Cloud Lineup
(Bloomberg) — Salesforce.com Inc., attracting more customers with a bigger lineup of products, boosted its annual revenue forecast and bolstered optimism about future sales growth for its cloud-based services.
Chief Executive Officer Marc Benioff has been buying companies and investing in technologies to expand Salesforce’s products with more tools in areas such as artificial intelligence and online shopping. The San Francisco-based company announced or closed more than a dozen acquisitions last year that cost more than $4 billion. Benioff’s strategy appears to be paying off, while Salesforce also is benefiting from the general demand for cloud-based software that lets businesses access applications without the expense and effort of installing them on their own servers.
The company forecast fiscal 2018 revenue of as much as $10.3 billion and adjusted profit of as much as $1.30 a share. Analysts on average estimated $10.2 billion in sales and earnings of $1.28 a share. Salesforce also said sales for the current quarter may reach $2.52 billion, topping analysts’ projections.
“The products are now really capable of meeting a lot of the enterprise needs,” said Steven Koenig, an analyst at Wedbush Securities. “The acquisitions are helping.”
Salesforce’s unbilled deferred revenue, a closely watched measure that indicates the amount of business booked but not yet recognized, climbed 26 percent from a year earlier to $9.6 billion, as of the quarter ended April 30.
“Companies are undertaking this journey around digital transformation, and the first starting point for that is around the customer,” said Keith Block, chief operating officer. “And because they’re starting this transformation around the customer, they’re coming to us. And that is what is driving these results.”
Shares of Salesforce gained less than 1 percent in extended trading after the earnings report. Earlier, the stock closed at $87.75 in New York and has climbed 28 percent this year.
Profit, excluding certain costs, was 28 cents a share in fiscal first quarter, the company said in a statement. Revenue climbed 25 percent to $2.39 billion. Analysts had predicted profit of 26 cents on revenue of $2.35 billion.
While acquisitions are helping fuel the company’s growth, Benioff has signaled he’s now in less of a shopping mood. In March, during an interview on Bloomberg Television, he said, “because the M&A windows have narrowed, I just don’t see us doing a lot of M&A this year.”
That feeling hasn’t stopped the company from reaching partnerships to expand product offerings. In March, International Business Machines Corp. and Salesforce said they were teaming up to integrate the artificial intelligence capabilities of their business software. While IBM has “Watson,” Salesforce has “Einstein,” which it rolled out last year. The alliance aims to improve customer interactions in sales, service, marketing and e-commerce.