5 Things You Need to Know From Salesforce’s Earnings Call

August 31, 2016, 11:59 PM UTC
Key Speakers At 2015 The Dreamforce Conference
Photograph by David Paul Morris—Bloomberg via Getty Images

Salesforce second quarter earnings call was something of a mixed bag.

The business software company’s revenue during the period rose 25% to $2.04 billion from $1.63 billion a year ago. But disappointing third quarter guidance spooked investors, sending shares sliding more than 7% at one point in after-hours trading to $73.49.

For the current quarter, Salesforce (CRM) said it expected earnings of 21 cents to 22 cents per share on revenue of $2.11 billion to $2.21 billion. The problem was that analysts had expected a slightly higher profit of 24 cents per share on revenue of $2.13 billion.

Here’s what else you need to know from the call:

1: It’s all about artificial intelligence.

For those who didn’t get the memo about Einstein, Salesforce’s planned artificial intelligence effort, chief executive Marc Benioff spent quite a bit of time talking very generally about it. Einstein, he said, will be both an AI platform for building new software as well as AI extensions to Salesforce’s existing sales, marketing, and analytics software.

AI’s promise is that the software will figure out what you need even before you ask for it. If a salesperson, for example, wants to track down a hot sales lead, the software would use historical or new data to provide names, phone numbers, and email addresses to reach those people.

Salesforce will reveal more about the plan at its annual Dreamforce conference in a few weeks. Einstein, Benioff said, is the outgrowth of a series of AI acquisitions including RelateIQ, MetaMind, Implisit, PreductionIO, and TempoAI.

As a result of that buying spree, Salesforce now fields a team of 175 data scientists that are “stitching together this amazing platform,” Benioff noted.

2: Acquisitions remained key

Salesforce may have been outbid for LinkedIn by Microsoft (MSFT), but Benioff say its $2.8 billion acquisition of e-commerce Demandware is a huge game-changer. Demandware’s e-commerce capabilities fit nicely with Salesforce’s marketing software. What retailer, after all, does not need marketing?

Also its $582 million acquisition of Quip in early August, gives Salesforce not only a slick word processing application, but a key tech visionary in Quip chief executive Bret Taylor, who also helped create Google (GOOG)Maps while at that company. He was also formerly Facebook’s (FB) chief technology officer.

3. There was some sluggishness in the U.S.

Benioff and Salesforce chief financial officer Mark Hawkins acknowledged that U.S. sales slowed late in the quarter, and they tried to downplay any broader concern.

“The softness was at the end of the quarter, in July, but none of these deals are going away. None are lost, they may take different shapes and sizes but all of these deals are in play,” Hawkins said.

Benioff said he doesn’t read much into this. “Sometimes you get a quarter where a geography has softness. I don’t attribute it to any one factor, it is what it is, you move on,” he said.

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4: That $10 billion year is in within grasp.

After pledging not to provide any forward guidance Benioff added, “I can do the math and so can you, we’re very close to talking about our $10 billion year but I’m not going to do that on this call.” The company’s current $2.4 billion in quarterly sales means it can meet that goal if it can keep up its numbers.

In May, 2015, Benioff said he wanted Salesforce to hit the $10 billion mark faster than any other enterprise software company. Apparently, he’s sticking to the goal.

What’s next? “When we pass through that, we’ll take a very aggressive goal to double the company,” Benioff noted without further explanation. A company spokeswoman declined to elaborate on his comment.

5: There was no mention of new BFF Amazon

What struck many about Salesforce’s first quarter call in May was how often Benioff talked up Amazon (AMZN), its chief executive officer Jeff Bezos, and Amazon Web Services.

A week later, the two companies announced a big collaboration in which Salesforce committed to use AWS to host new software products while Amazon employees had rights to use all of Salesforce’s software.

Watch for more on Salesforce:

Salesforce traditionally ran its software out of its own data centers, so it’s a major shift for it to move more of those operations over to AWS. That deal, according to Salesforce’s SEC filings, will amount to Salesforce using $400 million in AWS services over four years.

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