The News: On August 30, Salesforce reported its Fiscal Q2 2024 earnings for the quarter ending on July 31, 2023. Revenue reached $8.6 billion, which was up 11% on a year-over-year basis and 11% in constant currency, beating consensus estimates. Read the Salesforce FY Q2 2024 earnings press release for more information.
Salesforce shares closed Wednesday trading at $215.04, up 1.45% from the day’s opening price, and the company’s stock continued to rise, increasing 5.61% in the after-hours trading session.
Salesforce Q2 FY 2024 Reaches $8.6 Billion, Driven by Data Cloud
Analyst Take: Salesforce reported its Fiscal Q2 2024 earnings, posting revenue of $8.6 billion, which was up 11% on a YoY basis, beating analyst estimates. Despite continued challenges in the larger macroeconomic environment, the company beat analysts’ expectations, driven by growth initiatives across Salesforce’s core products, data, AI, services, industries, and international territories. In particular, Salesforce’s multi-cloud expansion strategy, which is evidenced by the more than 450 customers who invest more than $10 million annually in an average of seven clouds, is helping Salesforce execute on its vision of incorporating AI + Data + CRM + Trust to deliver for its customers.
Salesforce has been rapidly adopting and incorporating AI into its product offerings and rolling them out throughout the quarter. The company has been among the most active SaaS vendors in incorporating generative AI technologies across its product portfolio, while also demonstrating a commitment to deploying it responsibly, via the Einstein Trust Layer. Our view is that, given the rapid integration of generative AI into Sales Cloud, Marketing Cloud, Service Cloud, and Commerce Cloud, among its other products, Salesforce should be able to continue to win over prospects that are increasingly trying to leverage the customer data they have been collecting to provide more personalization and context-relevant products and services.
Further, the company is benefiting from its customers’ desire to consolidate their technology platforms. Brian Millham, President and COO, noted that six of Salesforce’s top 10 customer wins in the quarter included five or more clouds. Indeed, during the quarter, Salesforce added customer wins in North America, such as SiriusXM, KPMG, and FedEx, as well as internationally, including Hargreaves Lansdown in EMEA, Department of Education in Victoria in APAC, and Banco Carrefour in LATAM.
Here are the Salesforce Q2 FY 2024 results by the numbers:
- Salesforce Q2 FY 2024 revenue of $8.25 billion, up 11% YoY
- Subscription and Support revenues were $8.01 billion, up 12% YoY
- Professional services and other revenues were $0.60 billion, up 3% YoY
- Gross profit was 74% versus 72%, up 200 basis points YoY
- Non-GAAP operating margins were 31.6%, up more than 1,000 basis points YoY
- Non-GAAP diluted earnings per share (EPS) of $2.12, up 78.2% YoY
- Total remaining performance obligation was $46.6 billion, up 12% YoY
Fiscal Q3 2024 and Full-Year Guidance
Salesforce is raising its Q3 FY 2024 guidance and is projecting its revenue to be in the range of $8.70 billion to $8.72 billion, at an approximately 11% year-over-year growth rate. On an annual basis, the company is projecting its full-year revenue guidance is expected to be in the range of $34.7 billion to $34.8 billion at an approximately 11% year-over-year growth rate. For its Q3 FY 2024 guidance, Salesforce expects its non-GAAP EPS to be in the range of $2.06 to $2.06, while it expects its fiscal full-year non-GAAP EPS to be in the range of $8.04 to $8.06.
Fiscal Q2 2024 Sales by Region
At a regional level, for Salesforce Q2 FY 2024 revenue growth was led by the Asia Pacific region at 24% YoY growth, followed by Europe at 17% YoY growth and the Americas at 10% YoY growth. From a revenue perspective, the Americas represented the largest region at $5.8 billion, followed by Europe at $2.0 billion and Asia Pacific at $860 million.
Fiscal Q2 2024 Business Unit Commentary
From a business unit perspective, all units continue to post double-digit revenue growth for fiscal Q2 2024 in constant currency. Leading growth was Data at 16% YoY, followed by Sales and Service growing at 12% and Platform and Other at 11%, while Marketing and Commerce came in at 10% YoY growth.
While Salesforce acknowledged that the macro environment continues to impact customer decision-making, reflected in elongated sales cycles, additional deal approval layers, and deal compression in the company’s subscription and support and professional services businesses, Salesforce continues to post strong results, thanks to its ability to execute its strategy of driving deeper into organizations by offering a multi-cloud suite that cuts across a wide range of functional areas.
The vision of equipping workers with their own productivity assistant by embedding AI across the entire suite of products is not solely a Salesforce vision. However, the company’s rapid deployment of these tools across a wide range of job functions and tasks, including front-line service workers, is a testament to the company’s belief that AI—deployed responsibly—can unlock the transformational power of data, and will, in the words of CEO Marc Benioff on the earnings call, “ignite a buying revolution.”
Overall, Salesforce Q2 FY 2024 earnings exceeding analyst expectations was not a surprise, given the company’s structural changes and focus on improving profitability. Further, the price hikes that were announced earlier in the summer are not baked into FY 2024 guidance, with Millham expecting impacts to occur over the next 3 years as contracts renew.
Our view is despite continuing macroeconomic challenges, the company is in a strong position to leverage the growing demand for technology platform consolidation and the integration of new AI functionality. As such, it appears that Salesforce will continue to beat expectations throughout FY 2024, and is well positioned for profitable growth in the coming years.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discussed Salesforce earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
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Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
Keith Kirkpatrick is Research Director, Enterprise Software & Digital Workflows for The Futurum Group. Keith has over 25 years of experience in research, marketing, and consulting-based fields.
He has authored in-depth reports and market forecast studies covering artificial intelligence, biometrics, data analytics, robotics, high performance computing, and quantum computing, with a specific focus on the use of these technologies within large enterprise organizations and SMBs. He has also established strong working relationships with the international technology vendor community and is a frequent speaker at industry conferences and events.
In his career as a financial and technology journalist he has written for national and trade publications, including BusinessWeek, CNBC.com, Investment Dealers’ Digest, The Red Herring, The Communications of the ACM, and Mobile Computing & Communications, among others.
He is a member of the Association of Independent Information Professionals (AIIP).
Keith holds dual Bachelor of Arts degrees in Magazine Journalism and Sociology from Syracuse University.
