What To Expect From Salesforce’s Q3 Earnings

Salesforce (NYSE:CRM) is scheduled to report its third quarter results on November 18th after market close. ^[1] The quarter ended October 31st has been an eventful one for the company, with its acquisition of Krux, rumored interest in acquiring Twitter, successful partnerships with Ubisoft, Schneider Electric, Aldo and Dunkin Donuts, the leak of the company’s proposed acquisitions targets and its flagship event – Dreamforce – grabbing headlines. In the same period, the company launched Salesforce Einstein – its offering in the artificial intelligence space.

In the second quarter, the company’s revenue grew by nearly 24.6% year-on-year (y-o-y) to $2.04 billion, which was driven by a surge in subscriptions for AppCloud and Service Cloud. Buoyed by the results in that quarter, the company guided for Q3 revenue in the range of $2.11-$2.12 billion, and adjusted net income of $0.21-$0.22 per share. For the same period, the markets expect revenues and adjusted EPS to be around $2.13 billion and $0.24, respectively.

Salesforce continues to sustain its revenue growth at over 20% despite renewed competition. Additionally, the company’s acquisitions have helped it diversify its offerings in order to cater to newer markets while also augmenting the existing offerings. The new offerings are expected to positively contribute to the company’s top line but impact the bottom line due to acquisition-related expenses. Additionally, the company’s focus on improving its bottom line has paid dividends, with the company reporting operating profits in the past five quarters. Amidst increased acquisition related costs, we expect this trend to continue in the foreseeable future.

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1. Salesforce Announces Timing of Third Quarter Results, Investor Relations, October 27 2016 [↩]