Salesforce soars on big earnings beat

Key Points
  • A gain on investments benefited Salesforce's adjusted earnings in the quarter. 
  • The company's full-year guidance beat expectations, but earnings guidance for the current quarter was soft.
Marc Benioff, chairman and chief executive officer of speaks during the grand opening ceremonies for the Salesforce Tower in San Francisco on May 22, 2018.
David Paul Morris | Bloomberg | Getty Images

Salesforce shares rose as much as 14% in extended trading Tuesday after the enterprise-software company reported fiscal second-quarter earnings that surpassed analysts' expectations, the day after S&P Dow Jones Indices said Salesforce will replace Exxon Mobil in the 30-stock Dow Jones Industrial Average on Aug. 31.

Here's how the company did:

  • Earnings: $1.44 per share, adjusted, vs. 67 cents per share as expected by analysts, according to Refinitiv.
  • Revenue: $5.15 billion, vs. $4.90 billion as expected by analysts, according to Refinitiv.

The adjusted earnings were positively impacted by mark-to-market accounting for the company's investments, according to a statement. The company saw a $617 million unrealized gain in the quarter through its stake in nCino, a company operating cloud-based software for banks that went public in July. Salesforce also derives revenue from nCino's use of its services.

Salesforce's overall revenue grew 29% year over year in the fiscal second quarter, which ended on July 31, Revenue grew 30% one quarter earlier

Salesforce Marc Benioff talks stakeholder capitalism, joining the Dow Jones index

Revenue from the core Sales Cloud, which enables salespeople and managers to keep track of business, totaled $1.28 billion, growing 13% on an annualized basis. The Service Cloud product for customer support delivered $1.30 billion in revenue, up about 20%. Service Cloud revenue also slightly exceeded that of Sales Cloud one quarter earlier. The company's Platform and Other category, which includes the Tableau data visualization software Salesforce acquired last year for $14.8 billion, came to $1.51 billion, up nearly 66%.

In the quarter Salesforce announced the introduction of tools to help organizations return to work after the onset of the coronavirus pandemic, which caused offices around the world to close.

Salesforce's current remaining performance obligation, a measurement of future revenue under contract that the company believes will be recognized as revenue over the course of the next 12 months, totaled $15.20 billion, above the FactSet consensus estimate of $14.09 billion.

With respect to guidance, Salesforce called for 73 cents to 74 cents in adjusted earnings per share on $5.24 billion to $5.25 billion in revenue for the fiscal third quarter. Analysts surveyed by Refinitiv had expected 77 cents in adjusted earnings per share on $5.01 billion in revenue. 

For the full 2021 fiscal year Salesforce now sees $3.72 to $3.74 in adjusted earnings per share and $20.70 billion to $20.80 billion in revenue. Consensus among analysts polled by Refinitiv was $2.96 in adjusted earnings per share and $20.07 billion in revenue for that period. 

"I think that for a company like Salesforce, we don't really see an M&A environment," Marc Benioff, Salesforce's co-founder and CEO, told analysts on a conference call. He said the company is currently focusing on its own business. 

Excluding the after-hours move, Salesforce stock has risen 33% since the beginning of the year, while the S&P 500 is up less than 7%.