Salesforce (CRM) Q2 Earnings and Revenues Beat Estimates
salesforce.com inc. CRM delivered better-than-expected results for second-quarter fiscal 2021. The company’s fiscal second-quarter non-GAAP earnings soared 118% year over year to $1.44 per share and beat the Zacks Consensus Estimate of 67 cents.
Salesforce’s quarterly revenues of $5.15 billion climbed 29%, year on year, surpassing the Zacks Consensus Estimate of $4.9 billion. The top-line figure also improved 29% in constant currency (cc).
The enterprise cloud computing solutions provider has been benefiting from the robust demand environment as customers are undergoing a major digital transformation. The rapid adoption of its cloud-based solutions led to the better-than-expected performance during the fiscal second quarter.
Quarter in Detail
Coming to the company’s business segments, revenues at Subscription and Support increased about 29% from the year-earlier period to $4.84 billion. Professional Services and Other revenues climbed 23% to $311 million.
Sales Cloud revenues grew 13%, year over year, to $1.3 billion. Revenues from Service Cloud, one of the company’s largest and the fastest-growing businesses, also improved 20% to $1.3 billion. Moreover, Marketing & Commerce Cloud revenues jumped 21% to $700 million. Salesforce Platform and Other revenues surged 66% to $1.5 billion.
Geographically, the company registered revenue growth of 28% in the Americas (70% of total revenues), 23% in the Asia Pacific (9%), and 37% in Europe and Middle East Asia or EMEA (21%) on a year-over-year basis.
Salesforce’s gross profit came in at $3.84 billion, up 26.7% from the prior-year quarter. Additionally, gross margin contracted 130 basis points (bps) to 74.5%.
Salesforce posted a non-GAAP operating income of $1.04 billion, up 81.5% year on year. Operating margin expanded 590 bps to 20.2% on efficient cost management. Operating expenses flared up 23% year over year to $3.66 billion.
Salesforce exited the fiscal second quarter with cash, cash equivalents and marketable securities of $9.3 billion compared with the $9.8 billion recorded at the end of previous quarter. The company generated an operating cash flow of $429 million in the fiscal second quarter.
As of Jul 31, 2020, remaining performance obligation, which reflects future revenues under contract, were $30.6 billion, up 21% on a year-over-year basis.
Buoyed by stronger-than-expected second-quarter results, Salesforce raised its revenue outlook for fiscal 2021 to $20.7-$20.8 billion from the $20 billion projected earlier. The company now expects full-fiscal non-GAAP earnings per share to come in at $3.72-$3.74, up from the earlier expectation of $2.93-$2.95.
Operating cash flow is projected to be between 12% and 13%, up from the previous guided range of 10-11% on a year-over-year basis.
Coming to the fiscal third quarter, revenues are estimated between $5.24 billion and $5.25 billion, calling for 16% growth, year on year.
Furthermore, Salesforce anticipates non-GAAP earnings per share in the band of 73-74 cents for the fiscal third quarter.
Zacks Rank and Other Key Picks
Currently, Salesforce carries a Zacks Rank of 2 (Buy).
Other top-ranked stocks in the broader technology sector include Apple AAPL, Lam Research Corporation LRCX and Synaptics SYNA, all sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Apple, Lam Research and Synaptics is currently pegged at 10.7%, 15.4%, and 10%, respectively.
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