By Patrick Thomas
Salesforce.com Inc. gave a rosy outlook for sales in the current quarter and forecast growth ahead in the coming fiscal year, helping assuage investor concerns about a potential slowdown in technology spending and global economic growth.
The business-software maker guided fourth-quarter revenue growth of 25% from the year prior, which came in ahead of analysts' estimates, and for revenue for the coming fiscal year to reach about $16 billion. Co-Chief Executive Marc Benioff said in prepared remarks that Salesforce, founded in 1999, would become the fastest enterprise software company to reach the $16 billion annual revenue milestone.
Shares of Salesforce rose more than 7% in post-market trading as the firm on Tuesday also raised its forecast for revenue and profit for the current fiscal year. Salesforce's stock has gained 24% over the past 12 months.
While revenue growth of nearly 21% in fiscal 2020 would be slower for Salesforce than in recent years, Salesforce executives told analysts on a conference call Tuesday that companies are continuing to push for investments to support their digital transformation efforts.
"We still see very, very much a huge investment focus going on," Salesforce finance chief Mark Hawkins said on the call.
Salesforce also is benefiting from increased use in its Customer Success Platform, which powered more than 20 million e-commerce orders in the days between Black Friday and Cyber Monday, Mr. Benioff said. During the period, Salesforce said, retailers with which it has been working found that roughly 50% of orders were being placed by phone and 67% of online retail traffic is mobile.
In the third quarter, Salesforce posted stronger sales and grew its backlog of business though higher operating expenses weighed on its bottom line. Revenue rose 26% to $3.39 billion, as the company posted growth across geographic regions and industry groups. Analysts polled by FactSet had expected $3.37 billion of revenue in the quarter. Unearned revenue, which includes future billings, grew 25% to $5.38 billion.
Over all, Salesforce reported a profit of $105 million, or 13 cents a share, compared with $107 million, or 14 cents a share, the same period a year ago. Expenses related to research and development and marketing rose 22% and 36%, respectively.
The San Francisco company earned an adjusted profit, a figure that excludes costs like stock-based compensation, of 61 cents a share. Analysts were expecting earnings of 50 cents a share on an adjusted basis.
Salesforce's $6.5 billion acquisition of MuleSoft Inc., which closed in May, added $128 million in revenue in the latest quarter. The deal was aimed at helping customers tap data from older computer systems as they move to the cloud. Best known for its customer-management technology, Salesforce has been branching into other sectors through acquisitions.
For the current fiscal year, Salesforce now expects revenue to come in between $13.23 billion and $13.24 billion compared with between $13.13 billion and $13.18 billion previously. The forecast for adjusted per-share earnings was raised to between $2.60 and $2.61 from between $2.50 and $2.52.