Will Salesforce Revenue Grow By More Than 20% For FY 2020?

Yes, as per Trefis estimates, Salesforce.com‘s (NYSE: CRM) Total Revenue for FY 2020 (ended January 2020) will be $17 billion, up 28.2% y-o-y. In this $17 billion, Salesforce’s Cloud based CRM business is expected to contribute $11.9 billion to Salesforce’s 2020 revenues, making up 70.2%. The Cloud based CRM business segment’s total revenue is expected to be nearly 2.5x of that from the Cloud Software business. Salesforce is expected to add $8.7 billion in revenue between 2017 to 2020, out of which the Cloud based CRM segment is expected to provide $5.6 billion, that is 64.5% of the total expected increase. This Cloud based CRM segment revenue growth has been key to Salesforce’s 160% price appreciation since start of FY 2017, further helped by improving margins. We discuss Salesforce’s valuation analysis in full, separately.

Below we discuss Salesforce’s business model, followed by sections that review past performance and FY 2020 and 2021 expectations for Salesforce’s revenue drivers and competitive comparisons of its revenue with SAP and Oracle.

You can look at our interactive dashboard analysis ~ Salesforce Revenues: How Does Salesforce Make Money? ~ for more details.

Salesforce Business Model:

What does Salesforce offer:

• Salesforce is a global leader in customer relationship management (“CRM”) technology that helps companies in their relationships and interactions with customers.
• Salesforce was founded in 1999, Its products help companies to connect with their customers in multiple ways through technologies like cloud, mobile, social, Internet of Things (“IoT”), and artificial intelligence (“AI”).
• Their service offerings include Sales Cloud, Service Cloud, Marketing and Commerce Cloud, and Salesforce Platform.

Has 2 major Operating Segments:

• Subscription and Support: This segment comprises of subscription fees from customers accessing the enterprise cloud computing services (collectively, “Cloud Services”), software licenses, and from customers paying for additional support beyond the standard support that is included in the basic subscription fees.

• Professional Fees and Others: This segment includes related professional services such as process mapping, project management, implementation services, and other revenue. “Other revenue” consists primarily of training fees.

What Are The Alternatives?

• Major competitors include SAP, Oracle, Microsoft, IBM, and other companies offering similar solutions or similar results with different solutions.

What Is The Basis of Competition?

• The market is highly competitive, rapidly evolving, and fragmented, and subject to changing technology and low barriers to entry, shifting customer needs, and frequent introductions of new products and services. For how its revenue compares to its peers please visit our interactive dashboard – Salesforce’s Revenue.

Revenue growth of about $5 billion over two years driven primarily by Cloud based CRM Software segment:

• Total Revenue has grown from $8.4 billion in 2017 to $13.3 billion in 2019 primarily pushed by the Cloud based CRM segment. Trefis estimates further growth and Revenue to reach $17 billion and $20.9 billion in 2020 (ended Jan 2020) and 2021 (ended Jan 2021), respectively.
• Cloud based CRM software segment has seen a positive revenue growth over the years. Revenue grew from $6.4 billion in 2017 to $9.6 billion in 2019. Trefis estimates further growth and Revenue to reach $11.9 billion and $ 14.3 billion in 2020 (ended Jan 2020) and 2021 (ended Jan 2021), respectively.
• Cloud software segment has seen the highest increase in percentage terms in Total Revenue. The segment revenue increased from $1.4 billion in 2017 to $2.9 billion in 2019. Trefis estimates further growth and Revenue to reach $4 billion and $5.3 billion in 2020 (ended Jan 2020) and 2021 (ended Jan 2021), respectively.
• Consulting and Services segment revenue also grew at a high rate. It increased from $0.6 billion in 2017 to $0.9 billion in 2019. Trefis estimates further growth and Revenue to reach $1.1 billion and $1.2 billion in 2020 (ended Jan 2020) and 2021 (ended Jan 2021),  respectively.