Salesforce posts record Q2 revenue and raises revenue guidance, but Wall Street frowns at earnings outlook

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Salesforce mugs at its offices in Bellevue, Wash. (GeekWire Photo / Taylor Soper)

Usually after a 27-percent jump in revenue that exceeded analyst expectations and set a record for the second fiscal quarter, a company like Salesforce could enjoy some after-hours love, but Wall Street dinged the company Wednesday after projections for third-quarter earnings appeared to come in below expectations.

Revenue for the three-month period ending July 31st was $3.28 billion, compared to revenue of $2.58 billion a year ago. Sales Cloud revenue topped $1 billion in quarterly revenue for what looks to be the first time, while Salesforce Platform revenue was the strongest-growing segment during the quarter, at 54 percent.

Earnings results for software-as-a-service companies are pretty complex these days thanks to accounting regulations that went into place at the beginning of the year and made it harder to compare performance across past periods, although hopefully that will be cleared up in the future by an update from the Financial Accounting Standards Board released Wednesday. Salesforce reported net income of $299 million during the quarter, and excluding special items earnings per share were $0.71, with a big boost from the new accounting regulations and a tax provision related to its Mulesoft acquisition earlier this year.

Salesforce now expects to record around $13.15 billion in yearly revenue halfway through its 2019 fiscal year, which would be a 25 percent jump compared to fiscal 2018 yearly revenue of $10.48 billion. But investors didn’t appear to be thrilled by its earnings outlook for the upcoming third quarter and sent the stock down three percent in after-hours trading, although it’s not clear how much of that involves confusion over the new accounting standards.

The company made a notable move during the quarter, elevating former president and chief operating officer Keith Block to the co-CEO position alongside co-founder and now co-CEO Marc Benioff. In a release announcing the earnings results, Block set a goal of $23 billion in revenue during its fiscal 2022 year, which would be a 74 percent increase in revenue compared to this year, assuming Salesforce hits the newly raised guidance for this year.

[Editor’s Note: Salesforce is a GeekWire annual sponsor.]



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