Salesforce confident after strong quarter

Salesforce raised its revenue forecast for the fiscal year, showing confidence that its expanded lineup of cloudbased software will continue to attract new business.

While analysts said there may be some concerns about future revenue, the company projected annual sales of $10.35 billion to $10.40 billion, with adjusted profit of $1.29 to $1.31 per share. Analysts on average were estimating $10.29 billion in sales and earnings of $1.30 a share.

The San Francisco company is pouring money into marketing tools, artificial intelligence and e-commerce services in the hopes of bolstering growth. Chief Executive Officer Marc Benioff — a longtime advocate of cloud software for businesses — is trying to find new ways to lure customers away from rivals Oracle and Microsoft.

In the company’s second fiscal quarter, which ended July 31, revenue climbed 26 percent from the same quarter last year to $2.56 billion, Salesforce said Tuesday. Profit, excluding certain costs, was 33 cents per share. Analysts projected adjusted profit of 32 cents on revenue of $2.52 billion.

Steve Koenig, an analyst with Wedbush Securities, said in an email that it was an excellent quarter. “In the big picture, we’re encouraged,” he said.

Koenig noted some potential issues with billings growth, which the company said would be just into double digits in the current quarter. But, he said, billings can be affected by the timing of renewal invoices and can bounce around from quarter to quarter.

Mark Hawkins, the company’s chief financial officer, said in an interview that the company is looking to the future. “We’re able to invest in the long-term success of the company.”

After closing at a record $92.95 per share, Salesforce stock slipped about 1 percent in afterhours trading. The stock has gained 36 percent this year.

Revenue in one of the company’s key new areas, the marketing cloud business, gained 57 percent to $317.1 million in the second quarter, about the same growth rate as the previous period. Sales rose 17 percent to $886.4 million for its central business in tools for managing customer relationships.

The company is the clear leader in the market, according to IDC. In 2016, Salesforce was No. 1 worldwide with 18 percent share, the research firm said. Oracle was No. 2 with 9.4 percent, and SAP had 7.2 percent.

In the current period, Salesforce said, revenue will be as much as $2.65 billion. Analysts on average estimated $2.61 billion. Profit will be 36 to 37 cents per share, topping projections of 35 cents.

Salesforce’s unbilled deferred revenue, a closely watched measure that shows the amount of business under contract, but not yet recognized, climbed 30 percent from a year earlier to $10.4 billion. It increased 26 percent in the previous quarter.

While the company has continued spending, the pace of its acquisitions has slowed compared with last year, when it went on a record buying spree. Salesforce closed or announced deals valued at more than $4 billion in 2016. That included those with Metamind, which assisted in the company’s push into artificial intelligence services, and Demandware, which added capabilities for e-commerce.

This year, Salesforce has announced only one deal, focusing instead on generating growth from its prior deals, especially in the artificial intelligence market.

Brian Womack is a Bloomberg writer. Email: bwomack1@bloomberg.net