Will Salesforce.com’s Revenue Growth Continue In Q1 2019?

by Trefis Team
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Salesforce.com‘s (NYSE: CRM) is set to announce its Q1 2019 (ended April 2019) results on June 4, 2019, followed by a conference call with analysts. The market expects the company to report revenue close to $3.7 billion in Q1 2019, which would be an increase of 22.5% y-o-y. The increase is mainly expected as the cloud segment is set to continue the growth. Market expectation is for the company to report earnings of $0.61 per share in Q1 2019, down from $0.74 per share in the year-ago period.

 

Salesforce.com reported $13.3 billion in Total Revenues in FY 2018. This included 3 revenue streams:

  • Cloud Based CRM Software: $9.6 billion in FY 2018 (72% of Total Revenues). This includes revenues generated from subscription and support of the Salesforce platform.
  • Cloud Software: $2.8 billion in FY 2018 (21.5% of Total Revenues). This includes revenues generated from subscription and support of Sales Cloud, Service Cloud, and Marketing & Commerce Cloud.
  • Consulting and Services: $0.9 billion in FY 2018 (6.5% of Total Revenues). This includes revenues generated from any professional services provided by the company.

 

We have summarized our key expectations from the earnings announcement in our interactive dashboard – What Has Driven Salesforce.com’s Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019? In addition, here is more Information Technology Data.

 

Key Factors Affecting Earnings:

Revenue Growth to continue:

  • Salesforce.com has seen continuous growth over the years and over the last 8 quarters. The growth has been above 25% every quarter in FY 2018 as compared to the same quarter in FY 2017. We expect the growth to continue in Q1 2019 (ended April 2019).
  • In absolute terms the Cloud based CRM Software segment has grown the most as the company continues to be a synonym for CRM Software across the globe. The revenue from the segment is expected to increase from $7.8 billion in FY 2017 to $11.2 billion in FY 2019.
  • The Cloud Software segment has registered the highest growth in terms of percentage over the past few years. The revenue from the segment is expected to increase from $1.9 billion in FY 2017 to $3.6 billion in FY 2019.

Trend in Expenses:

  • Cost of Revenue has been steady at around 26% of Total Revenue over the quarters. We expect the same to continue in Q1 2019 (ended April 2019).
  • Marketing and Sales expenses contributes the highest to Total Expenses. In FY 2017 they contributed about 46% but increased to around 50% of Total Expenses in FY 2018. We expect the same to be around 50% in Q1 2019 (ended April 2019).

Full Year Outlook:

  • For the full year, we expect gross revenue to increase by 20% to $15.9 billion, led by the growth in the Cloud segment.
  • Gross Profit margin is expected to remain in line at around 77%.

 

Trefis has a price estimate of $174 per share for Salesforce.com’s stock. The value is based on the expectation that the company is on a high growth path as they continue to expand reach across geographies.

 

 

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