CALIFORNIA: Salesforce.com Inc. provided more proof that cloud computing can drive a solid business, posting a 24% jump in quarterly revenue and issuing upbeat projections for the current and coming fiscal years.
The San Francisco-based online software vendor topped Wall Street expectations for its fiscal third quarter. It predicted that it will report more than $8.1 billion in revenue for the 12 months ending in January 2017, up 20% to 22% over the prior fiscal year and above analyst expectations.
Salesforce.com’s shares, which are up 30% this year, rose 5.8% more to $81.86 in after-hours trading.
The company, founded in 1999, helped pioneer the concept of selling access to software applications as an online service, part of the broader trend known as cloud computing. Its business began with a tool for corporate sales teams and has expanded through acquisitions and products built internally.
The company’s income statement has differences from those of conventional software companies, which typically book revenue as they sign software sales deals. Salesforce.com, by contrast, offers subscriptions to its services and books revenue from sales contracts gradually.
For that reason—and because of spending on marketing and stock-based compensation—the company typically loses money under standard accounting rules. Salesforce projected more net losses in the current quarter and fiscal year ending in January.
But deferred revenues, a measure used by Wall Street to evaluate subscription businesses, swelled 28% in the third fiscal quarter. Unbilled deferred revenue—another closely watched metric—totaled $6.7 billion, up 24%.
Brent Thill, an analyst at UBS, said customers are rewarding companies like Salesforce and Microsoft Corp. that provide broad offerings over companies that focus on individual pieces of software or services. “The platforms are winning in the market,” he said.
Marc Benioff, the company’s chief executive and co-founder, said his discussions with other CEOs have showed that they don’t care much about tech trends like cloud computing. Rather, they want to know how Salesforce’s services can help them grow.
“They want to talk about their customers,” Mr. Benioff said during a conference call. “They want to talk about how they are going to grow that top line.”
For the three-month period ended Oct. 31, the company reported a net loss of $25.2 million, or four cents a share, compared with a loss of $38.9 million, or six cents a share, a year earlier. Revenue increased to $1.71 billion from $1.38 billion.
Excluding stock-based compensation and other items, per-share earnings were 21 cents. Analysts polled by Thomson Reuters had predicted earnings on that basis of 19 cents on revenue of $1.7 billion.
For the current quarter, the company forecast adjusted per-share earnings of 18 cents to 19 cents and revenue of $1.78 billion to $1.79 billion. Analysts had expected per-share profit of 19 cents and revenue of $1.78 billion.
For the year ending in January 2016, the company raised its adjusted per-share earnings estimate to between 74 and 75 cents on revenue of $6.64 billion to $6.65 billion. It previously had projected per-share profit between 70 cents and 72 cents on revenue of $6.6 billion to $6.63 billion.
