Two very big news

Two very important things happened this week for the Salesforce.com stock.

On Monday the Dow Jones ( one of the 3 most important indexes of the US stock exchange) welcomed Salesforce.com (NYSE:CRM) to the world re-known Index. This change rewards the consistent performance of the Salesforce.com stock for the past 3 years which is now recognized by the financial institutions as a stable and mature business. This move will certainly increase investors’ confidence in this stock and should mechanically push its valuation up in the coming months.

The very next day, on Tuesday evening (Early Wednesday for APAC) Salesforce.com released its quarterly results, referred to as “earnings” which provides insight on the company’s financial performance for the last quarter.

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.

For non-finance people, this simply means that Salesforce generated over twice the profit that was forecasted and exceeded its revenue forecast by 5%. On the face of it, this seems like great news, but what does that really mean for you as a partner?

What is the impact for partners

Looking carefully into the numbers we can learn a few more valuable lessons.

  • The first important point to extract is probably the 617m of this revenue which is not related to Salesforce.com software business but to its’ investment activity in new ventures. This activity beneficiated from the current technology bustling environment. In short, Salesforce.com made some good investments that turned out a good return. If this revenue is great news for Salesfoce.com shareholders, it does not directly translate into more business for Salesforce partners.
  • The second main takeaway is probably the organic growth of the Salesforce.com business which is showing an increased diversification in revenue with Sales Cloud growing by only 13%, Service cloud by 20%. It is the Salesforce platform and other categories of products such as Tableau, Mulesoft which grew by an impressive 66%.

So, what to conclude from these facts?

Well, first of all, the diversification in revenue will mean that future consulting work and Salesforce.com focus is switching.

As the Sales Cloud platform is reaching a plateau in its growth, this also means that partners should not expect as much work coming from new clients joining the platform but may rather seek revenue through the development of existing accounts to find complementary revenue.

The diversification also means that partners able to deliver solutions for the Salesforce.com newest products and acquisitions will most probably grab a more important part of the future service market;  whether it is through customers using only those solutions or for the one going on a multi-cloud deployment – which we have seen a growing proportion in the past years.

To conclude, Salesforce.com earnings suggests that partners focused on Sales Cloud will probably see the viability of their offering diminish with time. Growth is switching towards new cloud solutions and projects will increasingly involve multi-clouds. While each partner positioning differs, investing in diversifying their offering to news clouds and aligning their practice with the development of Salesforce.com business will give them a better chance of succeeding in the future.

The objective of this article isn’t to give you investment advice but to provide Salesforce.com partners with valuable information on the current market trends. If you have the intention to invest in Salesforce stock, you should consider carefully any investment you make.