Amid rumblings of a merger or acquisition, Salesforce delivered a strong first quarter performance when it posted its 2015 Q1 earnings results last week. Beating analyst expectations, the software giant reported earnings per share of 16 cents for the quarter ending April 30, 2 cents more than anticipated. Revenue jumped 23 percent to $1.51 billion.
Chief Executive Officer Marc Benioff focused attention on a different potential headline maker, the company’s achievement of a $6 billion annual revenue run rate. On Wednesday’s (May 20) earnings call, Benioff told listeners, “We surpassed the $6 billion annual revenue run rate and we did that faster than any enterprise software company in history and we could not be more excited. Our current outlook puts us on track to reach a $7 billion revenue run rate later this year on the way to being the fastest to reach $10 billion, which is our dream and something that we are very focused on."
He believes if current contracts over the next four quarters hold true, Saleforce will become the first enterprise cloud computing company to reach this milestone. Business Insider notes Benioff’s assessment might be premature. During its first quarter earnings last month, Amazon reported revenues that could push AWS over the $6 billion mark this year as well.
Benioff touched on the successes of each of the company’s “clouds” and paused to highlight the new Analytics Cloud for the Apple Watch. The app was among the earliest developed for the wearable. Salesforce saw growth across all six of its cloud-computing segments, the fourth consecutive quarter of year-over-year growth. A strong dollar hurt revenue abroad, but sales increased across all three geographic regions. Sales in the Americas and the Asia-Pacific region rose 27 percent, while Europe performed slightly better at 28 percent growth.
Gartner named Salesforce the No. 1 customer relationship manger, a ranking reflected in the user rates. For the first quarter of the 2016 fiscal year, Salesforce registered 211 billion transactions—the most in any first quarter in company history and nearly 80 percent more transactions than one year ago. Broken down daily, that’s 3.4 million transactions every business day.
‘We Don’t Comment On Those Rumors’
Company leadership remained silent on the possibility of a merger, with President Keith Block simply saying, “We don’t comment on those rumors.” Speculations surged in April when it was reported Salesforce hired a bank to handle a potential union. Names including Google, Microsoft and Oracle have been mentioned as could be suitors. The software giant’s stock saw an all-time high following the reports.
CEO Benioff was much more forthcoming in discussing competitor SAP. Perhaps spurred by SAP CEO Bill McDermott’s earlier comments that a Salesforce acquisition was unlikely, Benioff made it clear Salesforce has SAP in its sights.
"We are really targeting one company to surpass, which is SAP,” he said. Not mincing words, Benioff continued, “Fortunately for us, their kind of lackluster growth execution and, you know, lack of innovation in their core products as we saw in their conference this quarter, well you know what? There needs to be a target, and that’s our next goal."
On the heels of a strong start, the company raised guidance for the second quarter and fiscal 2016. Salesforce projects quarterly revenues of $1.59 billion to $1.6 billion. The full-year forecast increased to a range of $6.52 billion to $6.55 billion, 20 percent more than the previous year. Salesforce’s stock received a boost from the solid performance gaining 5 percent in after-hours trading. It closed not far off of its 52-week high at $78.46.
Both Salesforce and analysts are bullish on the future. Whether or not that includes a merger or a spin-off is unclear. What’s certain is cloud-based software has found a comfortable home at the enterprise level.