M+E Connections

Strong Q2 Cloud Performance Helped Salesforce Thrive Despite COVID Challenges

Strong demand for Salesforce’s cloud-based software services helped the company overcome COVID-19 pandemic challenges in its second quarter (ended July 31), company executives said on an earnings call Aug. 25.

“Our revenue performance by cloud continued to demonstrate strength across the portfolio,” Mark Hawkins, the company’s CFO and president, told analysts.

Sales Cloud grew 13%, while Service Cloud grew 20%, he said. Platform and other revenue soared 66%, with sales from the Tableau interactive data visualization software company Salesforce bought last year “contributing 41 points of that growth,” he pointed out. Marketing and commerce grew 21%, he added.

Total Salesforce Q2 revenue grew 29% from a year ago to $5.15 billion, while profit soared to $2.63 billion ($2.85 a share) from $91 million (11 cents a share). Subscription and support revenue accounted for $4.84 billion of the revenue (up from $3.75 billion), while professional services and other revenue represented $311 million of the revenue (up from $252 million).

“Both the company and our customers navigated the crisis better than our guidance assumed” before the quarter, Hawkins told analysts.

“While our performance in Q2 leaves us optimistic about the future, it is important to note that we remain mindful of how the pandemic may continue to impact our customers and our community,” he warned.

Meanwhile, “as we look out over the next 12 months to 24 months, we realize it’s important for us to make a strategic shift in investments today to better position our company for continued growth and customer success in this new all-digital work-from-anywhere environment,” he noted.

Salesforce started Q2 with 54,000 remote employees working at home, Marc Benioff, Salesforce CEO and chairman, told analysts.

Reflecting back on the early days of the pandemic, Benioff said: “We knew that it was going to be critical for us to reshape our company — that this was a moment in time that you basically had to make a decision: Are you going to keep things the way they were or are you going to change? Are you going to shift? And we made a decision that we were going to change and we were going to shift. We shifted our operational values very aggressively. And as we changed those operational values, we started to see momentum build.”

In the process, Salesforce “got much closer to our customers,” he said, explaining: “We understood that if we were going to succeed in [a] moment like this, we were going to have to be closer to our customers than ever before, that we were going to have to change a lot of aspects of the company. As we made those adjustments, we saw the speed increase right up to the end of the quarter, and that was just really powerful.”

The fact that Salesforce had one of the best quarters in its history despite the pandemic’s many challenges is “both humbling and bittersweet,” he said, noting: “This has been such a challenging time for us [and] for our families.”

Although “we all want to get back to how things were,” Benioff said: “The reality is that’s never going to happen. We’re in a new world. We’re in an all-digital world” in which we’re doing our work “digitally, we’re living digitally, [and] we’re educating digitally.”