24-Aug-17

Salesforce FY18 Q2 Financial Results – What does it really mean?

By Humilis Consulting

As the curtain falls on Salesforce announcing their FY18 Q2 results, I wanted to take a little time to understand the numbers and what all this means for the Salesforce eco-system.

                              Whilst the financials will always change for the better or worse, it seems somethings at Salesforce are becoming part of the furniture:

Fortune 100 Best companies to work for:

2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017

Forbes: The World’s most innovative company:

2011, 2012, 2013, 2014, 2015, 2016, 2017

Fortune Worlds most admired companies:

2013, 2014, 2015, 2016, 2017

Forbes Innovator of the Decade:

                                                                                                                             2016

Where is the revenue coming from?

With the US being its birthplace, there is no surprise that the Americas region continues to lead the regional battle with $1.854 billion in revenue for the quarter. Despite being a business that is 18 years young, the Americas region reports an impressive 24% y/y growth.

EMEA has brought in an impressive $464 million to the table, an improvement of 34% y/y. The APAC region rounds it all up on $243 million, 25% year on year growth.

So, what product brings in what?

1)      Sales Cloud continues to be Salesforce’s biggest revenue generator, with 37% of Salesforce subscription and Service Revenue for the quarter. Sales Cloud itself has risen 17% y/y.

2)      Service Cloud follows just 7% behind, on 30% of Salesforce subscription and Service Revenue for the quarter. A rise of 21% y/y.

3)      Salesforce Platform sits in 3rd place with a 20% share of Salesforce’ subscription and Service Revenue for the quarter. Another impressive rise with a 32% y/y growth.

4)      Marketing Cloud and Commerce Cloud bring up the rear, but by no means are they the ugly duckling. Whilst it holds just 13% of the Subscription and Service revenue for the quarter, this is arguably Salesforce fastest growing area with a 57% rise y/y already.

 

Who actually uses Salesforce?

The numbers speak for themselves and show continued growth across all platforms in all geographies. But what really emphasis Salesforce global dominance is how many of the industry leaders depend on Salesforce.com

  • 90% of the Top Wealth Management funds USE Salesforce
  • 80% of the Global Car Manufacturers USE Salesforce
  • 80% of the Top US Retailors USE Salesforce
  • 75% of the top Global Pharmaceutical companies USE Salesforce
  • 70% of the Top European Banks USE Salesforce
  • 66% of the Top Global Communication companies USE Salesforce
  • 50% of Global retailers USE Salesforce

There is no doubt that Salesforce is continuing to grow and lead the CRM markets by some way. The typical threat any company faces is they don’t ‘evolve with the times’, arguably the customers who Salesforce target. Now, we all know Salesforce’s innovation is something to be in awe at, whether it be the launch of Trailhead, Einstein or continually improvement of Lightning. The question is can anyone come close to competing with Salesforce market offering any time soon?

There has been the consistent message that Amazon could rival Salesforce, especially given that Amazon have immense power across multiple areas. However, Salesforce and Amazon created a partnership recently for the Bezos founded company to support run Salesforce’s data centres outside of the US and ultimately improve their position in the EMEA and APAC markets. Perhaps meaning a power shift is not the case, and Bezos and Benioff see partnerships as the way forward.

Finally, there is our old friends, Microsoft. When they bought LinkedIn in 2016, many thought there could be a shift in power. I’ve personally not seen this at all, nor any foundations appearing. What has everyone else being seeing, is there another competitor that we are all under-estimating?

http://investor.salesforce.com/about-us/investor/financials/default.aspx

By Lewis Steadman - LinkedIn: https://www.linkedin.com/in/lewissteadman1/

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