Salesforce.com (NYSE:CRM) posted strong revenue growth in its recent earnings report and is taking additional share in the CRM market; however this growth is coming at the expense of gross margins. Despite the companies revenues notching a near 40% growth rate this quarter, it hasn’t been able to control its R&D and sales & marketing expenses, which continue to increase and led to a net loss of $4.2 million. Salesforce.com continues to add new customers and currently has a 15% share in the CRM market where it competes with SAP (NYSE:SAP), Oracle (NASDAQ:ORCL), Microsoft (NASDAQ:MSFT) and IBM (NYSE:IBM).

We currently have a $124 Trefis price estimate for Salesforce.com, which is slightly ahead of the current market price.

Customer Growth in CRM and Cloud Offerings Continues

Despite posting a net loss, Salesforce.com has seen record revenues this quarter and continues to add new customers. It added 6,300 net new customers this quarter which brings the total up to 104,000 users. This number doesn’t count the new customers from its Heroku and Radian6 acquisitions. All of its products, including the ones developed in-house and the ones acquired, continue to grow in terms of users. Though Salesforce doesn’t provide any specifics, it did state in the earnings call that it signed up more than 60 7-figure transactions and 3 significant 8-figure deals.^[1]

Salesforce.com’s CRM offerings and its non-CRM cloud computing products account for more than 90% of its Trefis price estimate. It currently leads the on-demand CRM market. We expect it to have a 21% share of the global CRM market by the end of the forecast period.

Salesforce.com also revised its guidance for FY2012 to $2.22 billion – $2.23 billion in revenues, which is slightly slightly higher than our expectations.

Rising Expenses Remain a Worry

While the revenue growth has been encouraging, Salesforce.com’s operating expenses have been increasing at an even faster rate. Its operating expenses as a percentage of revenue have ballooned to more than 80% this quarter compared to around 72% last year. Salesforce.com has been unable to control its sales & marketing expenses, which remains a cause for concern investors.

We believe that investor concerns on rising costs are primarily what led to the slump in shares following its earnings release.

Check out our complete price analysis for Salesforce.com

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