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Salesforce Becomes Fastest Enterprise Software Company to Reach $5 Billion

Posted on Friday, Feb 27th 2015

The global cloud computing market continues to grow forth at stellar rates. In a recent report by Market Research Media, the global cloud computing market is projected to grow 30% annually to $270 billion by the year 2020. One company that is seeing similar growth rates in their annual revenues despite their size is Salesforce (NYSE: CRM).

Salesforce’s Financials

Earlier this week they reported impressive fourth quarter results. Revenues grew 26% over the year to $1.44 billion, in line with the market’s projections. EPS of $0.14 was also in line with the Street’s forecast. As their CEO added, Salesforce reached $5 billion in annual revenue faster than any other enterprise software company. They are now targeting to achieve a similar status for a $10 billion annual revenue run rate.

During the quarter, revenues from Subscription and Support services grew 25% over the year to $1.35 billion and Professional services and other revenues were up 41% to $99 million.

Salesforce ended the year with revenues growing 32% to $5.37 billion with subscription and support revenues growing 31% to $5.01 billion and professional services revenues grew 46% to $360 million. EPS came in at $0.52 for the year.

For the current year, Salesforce expects revenues of $6.475 billion-$6.52 billion with an EPS of $0.67-$0.69. They expect to end the current quarter with revenues of $1.485 billion-$1.505 billion and EPS of $0.13-$0.14. The market is forecasting revenues of $1.49 billion with EPS of $0.15 for the current quarter and revenues of $6.5 billion with an EPS of $0.67 for the year.

Salesforce’s Market Expansion

Salesforce is focused on expanding their international presence. During 2015, they plan to grow their footprint in Europe and they are already opening data centers for that purpose. They will complete their expansion in France, Germany, and the UK this year. The presence in these geographies will help them target the small and medium businesses and government clients in these markets. They are following a similar strategy in Japan where they opened a second data center in December 2014.

Salesforce is also strengthening their focus on the retail industry. Recently, they tied up with Home Depot to implement a new model of customer service. Together, they have built a system that enables sharing and collaboration by employees, contractors, and consumers on one system. They are also working with high-end brands like Louis Vuitton to enable clienteling. Salesforce envisions clienteling to be the ability of a retail store agent to use their mobile device to personalize a customer’s visit to a store.

But Salesforce needs to watch out for competitors. Over the past few years, Oracle has been building their cloud services through acquisitions of big companies like Eloqua, RightNow, and Responsys. Other players like Microsoft have also expanded their cloud services significantly. For the recently reported quarter, Microsoft saw their cloud revenues more than double. For now, though, the pie is so large, that all the players will continue to grow, most likely.

Their stock is trading at an all-time high of $70.24 with a market capitalization of $44.32 billion.

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