Marc's on mute, but Salesforce's first $6 billion quarter tells its own tale

The line of Mr Marc just got disconnected.

That’s Marc Benioff, cut off in mid-flow as he announced Salesforce’s first $6 billion quarter yesterday. I can only imagine his frustration, although he did at least have the view of Geneva, Switzerland to take in while attempts were made to re-connect the CEO to his team on the post-results analyst call.

And there was a lot to talk about. For Q2 ended 31 July, total revenue was f $6.34 billion, up 23% year-over-year. Net income was $535 million compared with $2.63 billion a year ago (when the firm had picked up a $2 billion tax benefit).

Breaking down by cloud offering:

• Sales Cloud revenue was up 15% to $1.5 billion.
• Service Cloud revenue grew 23% to $1.6 billion.
• Marketing and Commerce Clouds rose 28%, to $1 billion.
• Platform and Other, which includes MuleSoft and Tableau, rose 24%, to $1.9 billion.

Before being cut off, Benioff returned to a familiar theme - that of Salesforce hitting a $50 billion run-rate:

You see where the numbers are going. You can see what the trajectory is, the velocity of the company, both in revenue and margin. And now you can also see that no other software company of our size and scale is really performing at this level. So, we are really quite confident and remain on our path to generate $50 billion in revenue by fiscal year '26, which doesn't seem very far away from right now. When we first gave that number, it seemed like it was so far away. Now it seems like, ‘Wow! This is going to happen’.

Other stats of note from the quarter:

• Four of the Top 10 deals came from the public sector.
• The biggest ever deal in terms of recurring revenue was signed - a public sector client.
• Tableau was in nine of the Top 10 deals in the quarter.
• MuleSoft was in eight of the Top 10 deals.
• The US grew 20% plus in revenue, EMEA 32%, APAC 26%.

Customer wins

Chief Revenue Officer Gavin Patterson picked up on some of the major customer wins and expansions during Q2, including Geico, Belron - owner of Safelite and AutoGlass, Freshfields, Dyson and Vodafone. He drilled down into a few of these, beginning with MillerKnoll, formed from the merger of Herman Miller and Knoll:

It's a fantastic example, a company pivoting with great digital customer experience. So back at the start of the pandemic, MillerKnoll saw a huge spike in demand for their furniture, not surprisingly. Of course, they turned to Salesforce to transform their e-commerce experience in the quarter and are already seeing a significant improvement in conversion rates on the back of that.

Since then, they've been providing an even better experience, tailored product recommendations, a streamlined checkout experience, and next-generation video chat. And on top of that, MillerKnoll is a net-zero company. And they're now using Salesforce sustainability cloud to track their carbon footprint and other climate-related initiatives. 

Another use case in point was RBC Wealth Management:

They're using the Customer 360 to streamline processes, integrate data from over 26 different systems to create a unified wealth management platform that provides advisors with a 360-degree view of every client. And I think that's something that really brings the Customer 360 to life for more than 2,100 RBC financial advisors. I think this example, to me, I think, is very powerful. They've been using Salesforce workflow automation to transform the client onboarding process, which was several weeks, more than 100 pages of physical documents, and it is now a digital task that takes just 24 minutes. 

Finally IKEA was cited as another example of Customer 360 in action:

We've already been helping them with marketing. They've been getting great ROI with Market Cloud across over 30 markets. Now as home improvements were soaring in the pandemic, they turned to us to use Field Service to help schedule in-home planning business, installations, after-service support across the US.

Slack impact

All that said, most attention fell on Slack. The completion of the acquisition leads to a phrase we’ll be hearing a lot of - Slack-First Customer 360. Chief Operating Officer Bret Taylor picked this up:

We did an event last week on this idea of a Digital HQ where we announced Slack-First Sales, things like deal rooms inside of Slack Connect integrated with Sales Cloud. Slack-First Services, which are things like case-swarming for digital customer service teams, Slack-First Marketing and Slack-First Analytics. Those capabilities are going to be in the hands of our customers soon…It’s going to show up in things like multi-cloud deals that include Slack.

The Digital HQ idea is one that has particularly currency at the moment, he suggested, with the Vaccine Economy taking shape, but COVID variants meaning that the new pandemic world isn’t going away. Salesforce has seen this in action, said Taylor:

We've opened half of our offices. But as you can imagine, not as many people are showing up as we had hoped at this point because of this pandemic. I've started two companies and I started by planning my office space. Now, if you're starting a company, you start by planning your Digital HQ. That's really what we want to bring to every company in the world, help them build the digital infrastructure to help them succeed in this 'new normal'. 

Back on the line - courtesy of CFO Amy Weaver’s cell-phone - Benioff affirmed this view:

When we first started talking about ‘success from anywhere’, that employees would have a choice between office [and] home…CEOs would call me and say, ‘Marc, you don't understand. Everybody is coming back. Everything is going back the way it is. And then it's over’. And I think now those calls have stopped. People have realized things have really changed. This pandemic has changed things and work has changed....we might have been talking about Digital HQ before the pandemic, but after the pandemic, it means something very different.

That’s likely to remain the case for some time. As Benioff observed, Delta is far from being the last letter in the Greek alphabet. He also noted there are also different environments around the world that need to be catered for:

In San Francisco, it's very different than how it is right here in Geneva, Switzerland, let me tell you. It's very, very different. I was in office buildings today. There's nobody in my office building right now. And also, people are not wearing masks in office buildings here. Everybody is supposed to wear a mask legally in San Francisco right now. So things are different and this is what is amplifying us. We're in a tremendous new world and Salesforce has never been more positioned for an economy and for a world.

My take

Marc on mute was clearly not what anyone wanted, but it did serve to illustrate the strength of the current management team that Benioff has assembled around him, with Taylor, Patterson and Weaver effortlessly picking up the slack - sorry, irresistible! - and carrying on seamlessly. A great quarter again and the completion of the Slack deal has a real air of entering a game-changer of a next phase for the firm, if not the industry as a whole. We’ll hear a lot more about that in a few weeks at Dreamforce.