Salesforce delivers strong Q3, but outlook weaker than expected

Salesforce's results looked good as it enters its seasonally strong fourth quarter, but the company's outlook was a bit light.

Salesforce delivered a strong third quarter as the company continued to land large enterprise deals.

The company reported a third quarter net loss of $38.9 million, or 6 cents a share, on revenue of $1.38 billion. Non-GAAP earnings were 14 cents a share.

Wall Street was looking for third quarter non-GAAP earnings of 13 cents a share on revenue of $1.37 billion.

CEO Marc Benioff said on an earnings conference call that its Wave analytics cloud was off to a fast start:

"Our new Wave analytics cloud is an incredible achievement by our technology and product organization. I've never seen a product at Salesforce get off to a faster start. There has never been this kind of customer traction and excitement around a new product before. Major customers like EMC, Verizon and General Electric all signed up in the quarter and since launching the analytics cloud just a month ago."

As for the outlook, Salesforce projected non-GAAP earnings to be 13 cents a share to 14 cents a share on revenue of $1.436 billion to $1.441 billion. For the fourth quarter, Wall Street was expecting non-GAAP earnings of 14 cents a share on revenue of $1.45 billion.

For fiscal 2015, Salesforce said it will report non-GAAP earnings of 51 cents a share to 52 cents a share on revenue of $5.36 billion to $5.37 billion, up 32 percent from a year ago. Wall Street expected Salesforce to report earnings 51 cents a share on revenue of $5.37 billion for the fiscal year.

Salesforce also provided fiscal 2016 guidance and revenue between $6.45 billion and $65 billion, up 20 percent to 21 percent from 2015.

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By the numbers:

  • Deferred revenue as of Oct. 31 was $2.22 billion, up 28 percent from a year ago.
  • Research and development spending for the nine months ended Oct. 31 was $586.9 million, up from $450.7 million a year ago.
  • Subscription and support revenue was 93 percent of sales.
  • Salesforce ended the quarter with 15,458 full-time employees.
  • Cash and marketable securities were $1.83 billion.
  • The sales and service cloud account for the bulk of the company's revenue and 72 percent of revenue comes from the Americas.

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