Like clockwork, salesforce.com’s (NYSE: CRM) quarterly results impressed yet again, sending shares to new all-time highs. The software-as-a-service customer relationship management company reported revenue and non-GAAP earnings per share above its guidance and raised its outlook for fiscal year 2019.
As investors look over Salesforce’s fourth-quarter results for fiscal year 2018, here are some of the most notable takeaways from the period, including crossing the $10 billion annual revenue milestone, a significant boost to revenue guidance, and a reacceleration in service cloud revenue.
But first, here’s a look at the overall results for the quarter.
Highlighting Salesforce’s ability to outperform expectations, the company’s revenue and non-GAAP EPS, which increased by 24% and 25% year over year, respectively, exceeded management’s and analysts’ expectations. Salesforce’s fourth-quarter revenue and non-GAAP EPS were $2.85 billion and $0.35, ahead of consensus analyst estimates for $2.81 billion and $0.33, respectively.
Three things stood out from the quarter:
1. Fiscal 2018 revenue soared 25% year over year
Salesforce has consistently outperformed investor expectations for top-line growth — and this continued in fiscal year 2018, with revenue rising 25% year over year to $10.5 billion. To understand how impressive Salesforce’s full-year revenue of $10.5 billion is, consider that when management first provided guidance for Salesforce’s 2018 revenue, it forecast for revenue to be between $10.1 billion and $10.15 billion.
Not only did Salesforce hit its goal of crossing $10 billion in annual revenue in fiscal year 2018, but it crushed it. Now management has its sights set on a new revenue target: getting to $20 billion to $22 billion in annual revenue by fiscal year 2022.
2. Salesforce raised its guidance for fiscal 2019
Just one quarter after initiating its outlook for fiscal year 2019 revenue, management is already raising its guidance. Initially, management was expecting 2019 revenue to be between $12.45 billion and $12.5 billion. But now management expects fiscal year 2018 revenue of $12.6 billion to $12.65 billion. Not only is this well above the current consensus analyst estimate for 2019 revenue of $12.55 billion, but Salesforce CEO Marc Benioff noted that this is the most the company has ever increased its full-year guidance by.
3. Service cloud revenue increased 28% year over year
Salesforce breaks revenue into two major segments: subscription and support, and professional services and other. Subscription and support, however, accounts for 93% of revenue. Fortunately, management breaks down subscription and support revenue into sub-segments, differentiating these sub-segments by their cloud service offerings. Of these four service offerings (sales cloud, service cloud, service platform and other, and marketing and commerce cloud) Salesforce’s service cloud was a key driver during the quarter.
Service cloud’s year-over-year growth reaccelerated, posting 28% growth compared to 25% growth in Q3. This is an important trend since service cloud is the second-largest contributor to subscription and support revenue after sales cloud. In Salesforce’s fourth-quarter earnings call, management said growth in service cloud was driven by its customers’ increasing efforts to differentiate their businesses with better service.
With fast-growing revenue, surprising performance in service cloud, and an optimistic outlook, Salesforce just reinforced why it’s such a good long-term investment.
