Salesforce delivers strong Q3, ups revenue outlook

The fourth quarter non-GAAP earnings outlook is a bit light relative to expectations. Salesforce also projects fiscal 2019 revenue.

Salesforce delivered a strong fiscal third quarter and upped its revenue targets, but its earnings outlook for the fourth quarter is a bit light.

The company reported third quarter earnings of 7 cents a share on revenue of $2.68 billion, up 25 percent from a year ago. Non-GAAP earnings for the third quarter were 39 cents a share.

Wall Street was looking for Salesforce to report third quarter revenue of $2.65 billion with non-GAAP earnings of 37 cents a share.

Sales Cloud was Salesforce's largest business with revenue of $906.5 million. Service Cloud checked in with third quarter sales of $738.1 million.

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As for the outlook, Salesforce projected fiscal fourth quarter revenue between $2.8 billion and $2.81 billion with non-GAAP earnings of 32 cents a share to 33 cents a share.

Analysts were projecting fourth quarter revenue of $2.79 billion with non-GAAP earnings of 34 cents a share.

On a conference call with analysts, CEO Marc Benioff said the company is gaining more wallet share with customers. Keith Block, vice chairman, noted Salesforce was landing "wall-to-wall" deals. Benioff elaborated:

What wall-to-wall really means a multi-cloud deal. It's a solution that means it include sales, service, marketing, cloud, community analytics, Einstein, et cetera, depending on whether it's a B2B customer or a B2C customer, it may include Commerce Cloud and DMP. So as you know, our selling motion is to initially establish a chat with Sales Cloud which is typically a leading indicator of new logos. And we will paint a vision of transformation, and then the customer would start with the deployment of Sales Cloud and then we expand out to the right. And that would typically include Sales Cloud to Service Cloud to Marketing Cloud, et cetera, to platform. More and more customers are deepening their relationships with us.

Among the key items from the earnings conference call:

  • Salesforce has promoted a few executives. Bret Taylor will be president and chief product officer. Alex Dayon has been promoted to president and chief strategy officer. Both will report to Benioff.
  • The company talked digital transformation extensively and Block noted there is "a very accelerated increase in CEO-level dialogue. So that dialogue is all about digital transformation."
  • 40 percent of Salesforce's new hires year to date have been outside of the Americas. The company noted that it will continually expand internationally.
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For fiscal 2018, Salesforce projected revenue between $10.43 billion to $10.44 billion with non-GAAP earnings of $1.32 a share to $1.33 a share.

Salesforce also provided fiscal 2019 guidance. The company projected annual revenue of $12.45 billion to $12.50 billion, up 19 percent to 20 percent. Salesforce said it will provide its earnings and cash flow outlook on its fourth quarter report.

The company ended the quarter with 28,527 employees, up from 23,939 a year ago.

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