Salesforce.com (CRM, Financial), a major customer relationship management company, said fiscal second-quarter revenues increased 26% year over year, allowing the company to “become the first enterprise cloud software company to break the $10 billion revenue run rate,” according to CEO Marc Benioff.
Brief summary of earnings
Benioff stressed that Salesforce.com achieved the $10 billion revenue run rate “faster than any other enterprise software company in history,” a milestone that “even Oracle Corp. (ORCL, Financial) and Microsoft Corp. (MSFT, Financial) could not reach” in record time. The San Francisco-based company reported revenues of $2.56 billion during the quarter, outperforming its guidance by approximately $40 million. This included subscription and support revenues of $2.37 billion, up 26% year over year from the prior-year quarter. Continued commitments to customer trust and robust transactions on the company’s digital transformation platform primarily drove strong revenue growth for the company. Benioff mentioned in the earnings call that Salesforce.com generated over 5 billion transactions on the platform, which top companies like Amazon.com Inc. (AMZN, Financial) and Twenty-First Century Fox Inc. (FOXA, Financial) chose to drive their digital transformations.
Vice Chairman Keith Block mentioned other company highlights in the earnings call, including increased revenue growth internationally. The chief operating officer mentioned that 40% of new hires from the quarter were outside the U.S. and that Amazon remains a big partner in Canada and Australia. As the company remains committed to strengthening customer trust, Block reaffirmed Benioff’s dream of a $20 billion revenue run rate in the future.
Company offers strong growth potential for rest of the year
Salesforce.com has a profitability rank of 7 as its three-year revenue growth rate and three-year EBITDA growth rate both outperform over 84% of global application software companies. The company has a GuruFocus business predictability rank of 3.5 stars based on its revenue and earnings trend during the past 10 years.
The company increased its fiscal 2018 revenue guidance $100 million from the prior-quarter’s guidance as Salesforce.com delivered another “phenomenal quarter of growth,” according to Benioff. The CEO mentioned that the company “increased revenue guidance for the second quarter in a row and only the third time in company history” in the earnings call. Salesforce.com’s share price traded 1.3% higher than its previous close of $92 on the strong revenue guidance.
While the company’s stock price is near a 10-year high, Salesforce.com’s forward rate of return of 55.91% outperforms 95% of global competitors.
At least three gurus boosted their positions during the quarter: Andreas Halvorsen (Trades, Portfolio) added 2,133,784 shares, Steve Mandel (Trades, Portfolio) purchased 2,648,428 shares, and Stanley Druckenmiller (Trades, Portfolio) added 116,700 shares.
Disclosure: The author has no positions in the stocks mentioned.
