Salesforce.com has released its latest profit figures, with the customer relationship management (CRM) solutions provider noting better-than-estimated results. The company’s full-year revenue targets have now been increased for the fourth time. The latest quarter saw profit grow above the market’s expectations, with Salesforce attributing the growth to a high demand for cloud sales and marketing tools. As news of the latest profit increase was released, Salesforce shares grew by up to 6% during an extended trading period.
Salesforce.com is currently the largest of the world’s online sales software manufacturers. Over the past few years it has been bringing its tools to an increasingly large set of businesses that prefer to use easier and cheaper cloud software services than the traditional on-premises solutions. This means no software has to be directly downloaded onto a desktop computer, with users able to access programs and tools via the internet.
Shebly Seyrafi, an analyst at FBN Securities, said that the upside potential for the firm was huge. “What we are finally seeing after many years is some reasonable operating margin expansion,” he explained. Meanwhile, Pivotal Research Group analyst Brian Wieser said: “As revenue growth decelerates there should be an expectation of some general margin improvement over time.”
Salesforce’s own adjusted operating margin was set at 11.3% earlier in 2015; however, after the third quarter ended on 31st October, this figure has been increased to 13.3%. Such an improvement means that Salesforce has increased its overall forecasted revenue for the financial year ending January 2016 to between $6.64bn (£4.4bn) and $6.65bn from between $6.60bn and 6.63bn. It was shown that a 23.7% rise in revenue was noted during the third quarter, resulting in a total revenue of $1.71bn. Meanwhile, unbilled deferred revenue from contracts that have been closed with customers leapt by 24% to reach $6.7bn.
Over the past few years Salesforce has been stealing market share away from competitors such as SAP and Oracle Corp, largely in CRM tools that allow firms to organise and track their sales leads. Alongside rising revenue, the firm managed to narrow its net loss to $25.2m − down from $38.9m. Salesforce shares, excluding items, now earn 21 cents, beating previous analyst estimates of 19 cents per share.
With an increasing number of companies looking into the cloud computing market, it is unsurprising to see Salesforce’s figures climbing. With the cloud at a relatively early stage of development, revenue is likely to grow even further.
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