Salesforce.com Meets Consensus For Revenue, Will Cloud Segment Push The Growth For FY 2020?

by Trefis Team
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Salesforce.com (NYSE: CRM) announced its Q1 FY 2020 (ended April 2019) results on June 4, 2019, followed by a conference call with analysts. The company’s revenue were recorded in line with consensus at $3.7 billion, up by 24.3% y-o-y. The increase was driven largely by revenue from the CRM Software segment (the Salesforce Platform). The earnings missed consensus and were recorded at $0.49, lower than the $0.74 per share in the same period of FY 2019.

 

Salesforce.com reported $13.3 billion in Total Revenues in FY 2019. This included 3 revenue streams:

  • Cloud Based CRM Software: $9.6 billion in FY 2019 (72% of Total Revenues). This includes revenues generated from subscription and support Sales Cloud, Service Cloud, and Marketing & Commerce Cloud.
  • Cloud Software: $2.8 billion in FY 2019 (21.5% of Total Revenues). This includes revenues generated from subscription and support of of the Salesforce platform.
  • Consulting and Services: $0.9 billion in FY 2019 (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 2020? 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 2019 as compared to the same quarter in FY 2018. In Q1 2020 (ended April 2019) the revenue grew by 24.3% y-o-y to $3.7 billion.
  • 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 2018 to $11.2 billion in FY 2020.
  • The Cloud Software segment has registered the highest growth in terms of percentage over the past few years.

Trend in Expenses:

  • Cost of Revenue has been steady at around 26% of Total Revenue over the quarters. In Q1 2020 (ended April 2019) the same fell to 24.3% of Total Revenue.
  • Marketing and Sales expenses contributes the highest to Total Expenses. In FY 2018 it contributed about 46% but increased to around 50% of Total Expenses in FY 2019. In Q1 FY 2020 (ended April 2019) it continued to be around the same and was recorded at 50.7%.

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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