Salesforce (CRM) — Earnings Review — February 28, 2024

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Salesforce (CRM) — Earnings Review — February 28, 2024

Salesforce 101:

Salesforce is the 3rd largest enterprise software firm on the planet. It provides a broad suite of products to help clients optimize customer interactions, sales and marketing efficacy. The overarching niche is called customer resource management (CRM). Salesforce offers a variety of cloud services to its customers. These all enable digital management and optimization of a certain piece of a firm’s customer relationships. There’s a Sales Cloud, which perfects consumer touch-points. There’s a Commerce and Marketing Cloud to build online storefronts and augment promotional activity. There’s a Service Cloud to handle customer issues and inquiries. There’s also a platform cloud which includes Slack.

Most recently, it debuted its Data Cloud. This is an aggregated client database service to ingest, organize & glean insight from 1st party data. It conjoins siloed data and “unlocks” previously disparate sources for client value creation. It’s similar to what Snowflake does. MuleSoft and Tableau are both key pieces of this Data Cloud. MuleSoft integrates apps and data to allow for management of these products and interfaces within Salesforce. Tableau is a data visualization tool to create automated progress reports and suggestions for leveraging findings. Finally, it offers industry-specific clouds for sectors like healthcare. These are more customized to meet specific regulatory and operational needs. All of these clouds and products make up the firm’s subscription & support revenue, which represents 93% of its total business. Professional services make up the rest.

Separately, Salesforce offers a product called Einstein One. This is a full set of AI tools including outcome prediction, chat bots, image recognition, sales and sentiment analytics and more. It’s considered a general-purpose AI platform infused into all Salesforce products. Most recently, through an OpenAI partnership, it debuted Einstein GPT. Einstein existed before the GenAI wave, but is now getting an upgrade thanks to it. Einstein GPT allows Salesforce clients to plug into language models (including OpenAI, Anthropic and Cohere) to make workflows more productive, intuitive, conversational and automated. It features a low code tool set to reduce the barrier for non-experts to build applications and boasts expert-level tools to build more complex apps. That’s Salesforce in a nutshell.


Beat revenue estimate by 0.8% & beat revenue guide by 1%.

Source: Brad Freeman – SEC Filings, Company Presentations, and Company Press Releases


  • Beat EBIT estimate by 0.3%.
  • Beat FCF estimate by 40%.
  • Beat $1.28 GAAP EPS estimate & beat same guide by $0.19 each.

Annual Guidance & Valuation

Salesforce missed annual revenue estimate by 1.9%. It met EBIT estimates, which means EBIT margin guidance was slightly ahead when paired with the revenue miss. It guided to a GAAP EBIT margin of over 20% as stock comp is expected to stay at a modest 8% of revenue. It also beat $9.58 EPS estimates by $0.14 and beat $5.41 GAAP EPS estimates by $0.67.

It expects foreign exchange (FX) to be a small headwind and also expects continued professional service challenges. Subscription and Support growth is set to be over 10% Y/Y “including the impact of the still measured buying environment.” Encouragingly, signs of that environment improving popped up last quarter; this quarter the buying appetite took a complete and positive “180” per Benioff. Great news for Salesforce.

Salesforce trades for 49x 2024 GAAP EPS and 30x 2024 EPS. GAAP EPS is expected to grow by 45% Y/Y while EPS is expected to grow by 18.3% Y/Y. Non-GAAP excludes restructuring charges from last year, which is why GAAP growth is expected to be so much faster.

Balance Sheet

  • $14.1 billion in cash & equivalents; $4.8 billion in long term investments.
  • $9.4 billion in total debt.
  • Share count fell a bit Y/Y due to buybacks offsetting dilution. It added another $10 billion in buyback capacity.
  • Announced its very first dividend of $0.40 per share.

Call & Release Highlights

AI Bread & Data Butter:

Benioff is always excited on calls, but his tone towards the GenAI opportunity was still notably upbeat. There are a few big parts to this excitement. First is the aforementioned Data Cloud. The beauty of the Data Cloud is that it makes every other cloud that this firm offers better. It intuitively organizes data sets into categorically relevant metadata with descriptions to guide operations. More overarching data access & actionable usage mean more precise marketing campaigns, expedient customer service resolutions, optimized storefront layout optimization and better case management. 

Again… It helps everywhere. That’s likely why 25% of its largest deals included this product during the quarter. It’s also why ADP went with the Data Cloud to realize better product harmony than it thought possible. Salesforce proudly proclaims itself as the only CRM platform that can bring together ALL data sources in this utility-building manner. Many, many cloud providers help within subsections of CRM. None do as much as this firm does. All in all, Data Cloud annual revenue crossed $400 million this quarter growing at a 90% Y/Y clip. Momentum is set to continue with strengthening buyer appetite per the team; Gartner naming it #1 for enterprise data platforms should help too.

Einstein One is the next piece of Benioff’s notable excitement. As briefly mentioned, this is the firm’s overarching layer of unification that is infused into all of its cloud products – with one single interface. And unsurprisingly, it includes all of the product work CRM is currently doing in GenAI. The unification quality ensures these tools can be leveraged across all clouds without inconsistent user experiences. The product is “delivering substantial client returns” and is juicing Salesforce’s own new client growth with 50% of new logos in Q4 coming from Einstein. Schneider Electric is already enjoying a 15% boost to case efficiency with this tool. If data creates massive potential for Salesforce to drive GenAI-powered value, Einstein One is the suite that frees it to realize this potential.

Finally, Benioff is encouraged by what he sees as unmatched trust and security within Salesforce’s AI approach. The Data Cloud and Einstein include a very important “trust layer.” This ensures customer data access permissions are always followed. First party data is arguably the most valuable asset that a company has. They do not want to concede losing control of this data in exchange for embracing AI. Salesforce eliminates this trade-off. Benioff acknowledged that most foundational models are trained on aggregated public data sets. He also said one could argue these data sets are essentially stolen by the model creators. This basically means that every single model has access to the same data – more or less. The only way to stand out in that equation is via first party data. Leadership is adamant that the best way to use that data safely is through Salesforce.

Einstein Copilot (its conversational assistant spanning all clouds) just went live with more AI product announcements coming at its investor event next week.

It’s the mix of unified data access, its near-endless 3rd party model integrations, slick applications and the trust layer that has Benioff so excited about GenAI differentiation.

More AI News:

  • Tableau Pulse crossed 2,000 customers. This uses Einstein to deliver personalized AI insights via language or image.
  • Slack AI is now live. This offers GenAI tools like conversational channel recaps.

Financial Transformation:

Salesforce spent the last year fixing and resetting its cost base. It cut its M&A team, slowed hiring and fixated on margin accretive growth. The resulting margin trend listed above has been nothing short of impressive. To Benioff and his team, 2023 was the year of committing to serving shareholders. They delivered.

Platform Play, Demand & Go-To-Market:

As the largest enterprise software firm in the world, it’s no secret that Salesforce is a platform play. Its Data Cloud work made that reality even more crystal clear. That platform characteristic continues to resonate with large customers. It signed 78% more $10 million+ deals in calendar 2023 vs. 2022. That’s incredible at this scale.

  • Its new self service tier for smaller clients crossed 3,000 customers this quarter.
  • 50 of 100 largest deals included 6+ clouds.
  • Annually, Sales Cloud revenue rose 11% Y/Y, Service Cloud by 12% Y/Y, Marketing and Commerce Cloud by 9% Y/Y & Integration and Analytics Cloud by 20% Y/Y (MuleSoft +22% Y/Y) (Slack +17% Y/Y). This led to 12% Y/Y Subscription and Support revenue for fiscal year 2024. 
  • Traction in India is building. Revenue there rose 35% Y/Y.
  • Its overall industry cloud business crossed $4.8 billion in annual revenue +20% Y/Y.
  • Account executive productivity continued to improve after 25% Y/Y improvement last quarter.


This was a rock solid quarter. The guide wasn’t perfect, but isn’t anything to be alarmed by. This company is executing at an impressive clip and is taking great care of shareholders. It has made the needed decisions to deliver a profit explosion and has not seen growth suffer as a result. Its AI positioning is compelling and its team is world-class. This quarter was just more of the same wonderfully boring execution.

Disclaimer: Third party content is provided for informational purposes only and should not be construed as an offer to sell or a solicitation of an offer to buy or sell any security. Third party content is not intended to serve as a recommendation to buy or sell any security and is not intended to serve as investment advice. Third party content creators are not affiliated with BBAE Holdings LLC, (“BBAE”) Redbridge Securities LLC (“Redbridge Securities”) or BBAE Advisors LLC (“BBAE Advisors”). All investments involve risk, including the possibility of total loss of principal. For additional important information, please click here.

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