Salesforce Hits Record-Setting Milestone with $10 Billion Run Rate

When Salesforce (NYSE: CRM) reported its second quarter financials for its fiscal year 2018, for the period ended July 31, 2017, it had some

Subscription News: Salesforce Hits Record-Setting Milestone with $10 Billion Run Rate

Source: Salesforce

When Salesforce (NYSE: CRM) reported its second quarter financials for its fiscal year 2018, for the period ended July 31, 2017, it had some exciting news to share. Salesforce exceeded a $10 billion run rate, a milestone it achieved faster than any other enterprise software company. They also reported second quarter revenue of $2.56 billion, a 26 percent increase year-over-year, including subscription and support revenue of $2.37 billion, a 26 percent increase, and professional services and other revenue of $193 million, a 28 percent increase year-over-year. Subscription and support revenue now represents 92.6 percent of Salesforce’s total revenue.

‘We had our best quarter ever, and we reached a huge milestone for the company. As you might remember, two-and-a-half years ago, I talked about our dream of surpassing $10 billion in revenue. And at that time, we were just on a $5 billion revenue run rate,’ said Marc Benioff, chairman, CEO and co-founder of Salesforce, during the earnings call.

Subscription News: Salesforce Hits Record-Setting Milestone with $10 Billion Run Rate

Source: Salesforce

‘Now I’m absolutely thrilled that in the second quarter, we broke through the $10 billion run rate, doubling the company in such a short time,’ Benioff added. ‘Now Salesforce is the first enterprise cloud software company in the history of the industry to reach the $10 billion run rate. No competitor has pierced $10 billion this fast, not Oracle, not Microsoft, not SAP and certainly not with $15 billion of deferred revenue on and off the balance sheet. This makes Salesforce the fastest-growing enterprise software company ever to reach this milestone.’

‘While this was a phenomenal quarter of growth, we continue to improve our profitability, executing at scale, and we remain the fastest growing of all the top 5 enterprise software companies,’ Benioff said.

Other highlights of its fiscal second quarter for 2018 included:

  • Deferred revenue of $4.82 billion, a 26 percent increase year-over-year
  • Unbilled deferred revenue of $10.4 billion, a 30 percent increase year-over-year, including $625 million of unbilled deferred revenue from Demandware
  • Operating cash flow of $331 million, a 32 percent increase
  • Total cash, cash equivalents and marketable securities of $3.50 billion
  • GAAP diluted earnings per share of $0.02

Subscription and support revenue of $2.37 billion, broken out by cloud service offering, is as follows:

Subscription and Support Revenue by Cloud Service Offering

(in millions)

Sales Cloud

$886.4

Service Cloud

$698.5

Salesforce Platform and Other

$466.5

Marketing and Commerce Cloud

$317.1

 

Based on the company’s second quarter results, Salesforce is adjusting its third quarter and full year guidance for fiscal year 2018. Salesforce projects revenue to range between $2.64 billion and $2.65 billion, a 23 to 24 percent increase year-over-year. They estimate GAAP diluted earnings per share to be between $0.04 and $0.05. Balance sheet deferred revenue growth is estimated to be between 18 percent to 19 percent year-over-year.

Subscription News: Salesforce Hits Record-Setting Milestone with $10 Billion Run Rate

Source: Salesforce

For the full year, Salesforce projects revenue between $10.35 billion and $10.4 billion, an increase of 23 percent to 24 percent year-over-year. They estimated GAAP diluted earnings per share between $0.07 and $0.09, and operating cash flow is projected to increase 20 percent to 21 percent year-over-year.

What’s next? Benioff has his sights set on a $20 billion run rate to double the company again. The company is also planning its Dreamforce conference to be held in San Francisco November 6 to November 8.

Second quarter financials were reported on August 22, 2017. On that date, Salesforce stock closed at $92.95 per share. At 2:39 PM Eastern yesterday, Salesforce stock was valued at $93.82, so there wasn’t a huge spike. However, compared to August 29, 2016 when stock was $79.92 per share, Salesforce stock has increased $13.83 in value.

Subscription News: Salesforce Hits Record-Setting Milestone with $10 Billion Run Rate

Source: Google Finance – Yahoo Finance – MSN Money

Insider Take:

Salesforce may be the fastest growing enterprise software company right now, but it has experienced steady growth, and it continues to do well in its key segment – subscription and support. Its strong deferred revenue and unbilled revenue totals indicate Salesforce’s future growth, moving it closer to its $20 billion run rate target. In addition, the company has won industry awards including the title of Most Innovative Company in the World by Forbes. Salesforce has positioned itself for success for the remainder of this year and in the years to come.

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