In its latest earnings report, Salesforce has announced a deferred revenue increase of 26% in the first quarter. With the results proving to be better than had been expected, the company lifted its annual revenue outlook by $100 million from the figure that had been given three months ago.
Courtesy of the improved outlook, Salesforce now expects its annual revenues to increase by between 22% and 23% to reach a figure of between $10.25 billion and $10.30 billion. Compared to last year, Salesforce also expects its profit per share for the year to increase by a little over five cents.
The improved outlook was attributed to the ability of the business-software company to grow faster than had been expected a quarter ago. This growth is occurring even as the company faces sustained competition from the likes of ServiceNow Inc, Oracle Corp and Microsoft Corp. Despite the fact that competitors are eyeing customer-relationship management which is Salesforce’s forte, the company still has the capacity to obtain new business in this growing segment.
Because Salesforce depends on subscriptions of the internet-based, on-demand software that is mainly used by corporate customers, one of the strongest indicators of the firm’s prospects is deferred revenue. In the most recent quarter deferred revenue, which is basically subscription service fees that have been received by the business in advance, reached $5.04 billion.
Three months ago, Salesforce had surprised analysts as it had forecast that it would achieve a deferred-revenue growth of between 22% and 23% in the first quarter. This was an indication that growth in billings wouldn’t be as high as the previous year or as analysts had expected. A year earlier in the same quarter, the deferred-revenue growth had been 31%.
Another Salesforce business that is showing promise is Sales Cloud where revenues increased by 15% to reach a figure of $829.6 million. One of the competitors to Sales Cloud is Microsoft Dynamics which is understood to be using aggressive pricing to lure small and medium-sized clients. Sales Cloud is Salesforce’s flagship product.
Growth by acquisitions
The Service Cloud business of Salesforce grew by 21% to generate revenues of $651.2 million. Salesforce’s rival in this business is ServiceNow Inc. Marketing Cloud, the Salesforce product meant to assist in the management of advertising and email campaigns of customers, saw a growth of 56% to generate revenues of $289 million. The product was bolstered mid-last year when Salesforce acquired Demandware Inc.