1Q20 Results

Salesforce reported fiscal 1Q20 revenues of $3.74 billion, up 24.3% and beating the $3.69 billion estimate.

Adjusted EPS was $0.93, which includes a $0.27 per share gain for mark-to-market investments, compared to the $0.61 consensus estimate. GAAP EPS was $0.49, compared with $0.46 in the prior quarter.

Results by Segment

By type:

• Subscription and support revenues were $3.50 billion, up 24.4% year over year.
• Professional services and other revenues were $241 million, up 23.0% year over year.

By service offering:

• Sales cloud revenues were $1.07 billion, up 11.2% year over year.
• Service cloud revenues were $1.02 billion, up 20.3% year over year.
• Salesforce platform and other revenues were $842 million, up 46.4% year over year.
• Marketing and commerce cloud revenues were $561 million, up 32.9% year over year.

By geography:

• Americas revenues were $2.62 billion, up 24.6% year over year.
• Europe revenues were $755 million, up 24.6% year over year.
• Asia Pacific revenues were $265 million, up 22.1% year over year.

Details from the Quarter

• In the quarter, the company announced the new Einstein platform service that enables anyone to build custom AI-powered apps with just a few clicks, regardless of technical skill. The company also added Einstein AI capabilities to its entire product line, including Einstein Voice and Einstein Vision capabilities.
• Salesforce also added blockchain capabilities to its platform during the quarter, and Salesforce Blockchain was announced at the TrailheaDX developer conference last week.
• Trailhead is Salesforce’s online learning and reskilling platform, open to anyone. The company now has more than 1.4 million learners, and in the quarter, the new My Trailhead product became generally available. Any Salesforce customer can create their own branded service and reskill employees, customers and partners.
• Salesforce.org has officially been reunified as part of Salesforce, providing an improved experience for nonprofit education and philanthropy customers. Management views the change as a tremendous opportunity to accelerate its work in the nonprofit world.
• Long-time customer Dell expanded its activities to offer automated and intelligent customer experiences with Einstein Bots.
• Salesforce expanded its relationship with Tokio Marine, one of Japan’s largest insurance providers, which is standardizing sales and service and marketing on Salesforce, including deploying Financial Services Cloud to one million agents in over 50,000 agencies.
• The company also expanded its relationship with Italian utility Hera Group, which serves over 4.4 million citizens, in addition to forming a new relationship with People's Choice Credit Union, one of the largest credit unions in Australia.
• The US Department of Education recently selected Salesforce as its platform to modernize and streamline the experience of millions of citizens with federal loans.
• Southwest Airlines is creating a new employee experience with centralized knowledge built on Salesforce using certified communities, in addition to transforming delivery of its HR services with new sales service chat and mobile capabilities for more than 60,000 employees.
• Accenture selected My Trailhead for its client business, leveraging custom content for reskilling employees on artificial intelligence, networking and leadership development.

Implications for Retail

Salesforce offers a broad suite of solutions for retail, aimed at personalizing shopper marketing through awareness and acquisition, as well as engagement and advocacy; connecting commerce everywhere through enhancing the experience and transaction process; digitizing the store; delivering any-channel service; and, using customer relationship management (CRM) software to transform b2b relationships.

Outlook

Management commented it hopes to organically double revenue over the next four years, targeting revenues of $26-$28 billion in fiscal 2023.

Salesforce reaffirmed/raised its guidance for fiscal 2020:

• Revenues of $16.10-16.25 billion (up 21%-22%).
• Adjusted EPS guidance of $2.88-2.90 (up 5% year over year) and up from previous guidance of $2.54-2.56.

The company offered the following guidance for fiscal 2Q20:

• Revenues of $3.94-$3.95 billion (up 20%).
• Adjusted EPS guidance of $0.46-$0.47 (down 34%-35%).