The News: Salesforce reported strong earnings for its fiscal fourth quarter (Q4) 2024 and FY 2024, reporting revenue of $9.29 billion for the quarter ended January 31, up 11% on a year-over-year (YoY) basis, and up 10% in constant currency (CC), which beat Wall Street analysts’ estimate of $9.22 billion. On an adjusted basis, the company earned $2.29 per share compared with estimates of $2.26 per share. For FY 2024, the company reported revenue of $34.9 billion, up 11% YoY, and up 11% in CC, and posted an FY 2024 non-GAAP operating margin of 30.5%.
Salesforce Q4 2024 and FY 2024 results by the numbers:
- Q4 revenue of $9.29 billion, up 11% YoY, up 10% in CC
- Current remaining performance obligation of $27.6 billion, up 12% YoY, up 13% CC
- Earnings per share (EPS) of $2.29 adjusted versus $2.26 expected (LSEG)
- FY 2024 revenue of $34.9 billion, up 11% YoY, up 11% CC
- FY 2024 non-GAAP operating margin of 30.5%
- FY 2024 operating cash flow of $10.2 billion, up 44% YoY
FY 2025 Guidance
- Initiates FY 2025 revenue guidance of $37.7 billion to $38.0 billion, up 8%-9% YoY
- Initiates FY 2025 subscription and support revenue growth guidance of approximately 10% YoY, slightly above 10% YoY CC
- Initiates FY 2025 non-GAAP operating margin guidance of 32.5%
- Initiates FY 2025 operating cash flow growth guidance of 21%-24% YoY
Read the Salesforce FY Q4 2024 earnings release for more information.
Strong Cloud Growth Fuels Salesforce Q4 and FY 2024 Results
Analyst Take: Salesforce reported another strong quarter and FY end result, driven by strong sales of Data Cloud, which CEO Marc Benioff called “the fastest growing product ever,” noting that 25% of the company’s Q4 deals valued at more than $1 million included the product. From a top-line perspective, Salesforce has performed well over the past quarter, posting total Q4 2024 revenue of $9.29 billion, an increase of 11% YoY and 10% in CC. Although professional services and other revenue dipped by 9%, subscription and support revenue rose 12% YoY to reach $8.75 billion.
Across fiscal 2024, Salesforce generated total revenue of $34.9 billion, rising 11% YoY in CC, driven by subscription and support revenue of $32.5 billion, which rose 12% YoY. Professional services and other revenue were flat YoY, at $2.32 billion.
The company also reported Q4 2024 non-GAAP operating margin of 31.4%, and FY 2024 non-GAAP operating margin of 30.5%, reflecting the company’s focus on cost-cutting and driving more efficiency across its operations. Further, the company reported $3.4 billion in cash generated from operations in Q4 2024, an increase of 22% YoY, and free cash flow of $3.26 billion, up 27% YoY. Cash generated from operations for FY 2024 was $10.23 billion, an increase of 44% YoY, and free cash flow was $9.50 billion, an increase of 50% YoY.
On the earnings front, the company reported Q4 non-GAAP diluted EPS of $2.29, with losses on the company’s strategic investments negatively impacting non-GAAP diluted EPS by $(0.03) based on a non-GAAP tax rate of 23.5%. FY 2024 non-GAAP diluted EPS was $8.22, with losses on the company’s strategic investments negatively impacting non-GAAP diluted EPS by ($0.22) based on a non-GAAP tax rate of 23.5%.
Salesforce’s Key Strength Lies in Breadth and Depth of its Product Portfolio
Salesforce’s strong performance was largely due to the strong appetite for its cloud products, which have seen bookings growth over the past two quarters, according to Amy Weaver, Salesforce’s president and CFO. Moreover, eight of the top 10 deals completed in Q4 included six or more clouds, according to comments made by Benioff on the earnings call. He added that all of the company’s top 10 wins included sales, service, and platform clouds. Another key metric that demonstrated the strength of the company was the number of deals that were valued at more than $10 million, which grew nearly 80% YoY in fiscal 2024, according to Benioff.
The company is also set up well for future growth, as the company’s remaining performance obligation, or future contract revenue that has yet to be fulfilled, ended Q4 2024 at $56.9 billion, reflecting a 17% YoY increase.
Benioff also highlighted the strong market response to its Einstein 1 platform, which, along with its other generative AI products and its price hikes that were announced in mid-2023, have yet to materially contribute to Salesforce’s earnings. This should provide both top line and bottom line upside for the company throughout the next several quarters.
Looking Ahead to FY 2025
Despite the positive quarter and fiscal year, Salesforce’s FY 2025 guidance reflects several challenges in the market, including foreign-exchange pressure, continued weakness in professional services, and a potential slowdown in enterprise purchasing. For FY 2025, Salesforce said it sees adjusted earnings of $9.68 to $9.76 per share and $37.7 billion to $38.0 billion in revenue. This revenue figure implies 8.6% growth within the middle of the revenue range, while analysts had previously expected $38.6 billion in revenue and an FY 2024 FX headwind of about $100 million.
Ultimately, these factors affecting Salesforce are largely external to the company rather than a marker of any internal weakness or structural problem within the company. Although the Street initially reacted negatively to the pared-back guidance, we believe the company is still extraordinarily well positioned to weather any pullback in demand for cloud products in the months ahead.
Salesforce’s huge advantage in the market comes from its platform-based approach, which allows organizations to capture and use data from wherever it lies in the organization through Data Cloud, and as such, we expect the trend of organizations consolidating on its platform to continue. Revenue from Salesforce Data Cloud, which connects all of a business’s data to provide a 360-degree view of customers, is growing at about 90% YoY. Benioff noted that Data Cloud had ingested more than 7 trillion records in the quarter and saw more than a trillion activations driving customer engagement.
In addition, the company’s focus on Tableau and Slack as catalysts for creating better user interfaces to manage data should reap rewards as organizations seek to improve the efficiency with which its workers consume and use data to make decisions. The incorporation of generative AI that can link and draw data across all of Salesforce’s products is likely to help the company win additional large logos that are seeking to fully activate their data via an integrated AI approach.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discusses Salesforce’s 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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Image Credit: Salesforce
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 VP & 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.
