We all got the TAM [Total Addressable Market] wrong.
That was the assessment of Salesforce co-CEO Marc Benioff as the firm handed in another quarter of strong growth and brought fiscal 2022 to a head. For Q4, revenue of $7.33 billion was up 26% year-on-year with a GAAP loss of $28 million. Full year revenue of $26.49 was up 25% with GAAP net income coming in at $1.44 billion.
Other stats from the results announcement:
Sales Cloud grew 18% year-on-year in Q4 to hit $1.6 billion.
Service Cloud grew 17% to $1.7 billion.
Platform & Other - which includes Slack - was up 53% to $1.4 billion.
Data - including Mulesoft and Tableau - was up 23% to $1.1 billion.
Growth by geography in Q4 - 23% in the Americas, 38% in EMEA and 20% in APAC.
The numbers are “unprecedented”, argued Benioff, stating that he’s never seen enterprise software growth rates like it in 40 years. There is a COVID acceleration at play here, he noted, something that was also cited earlier in the week by Workday co-CEO Aneel Bhusri:
The reality is, over the last 2 years, what we have seen has been incredible demand. And really, that demand is linked to the digital transformations that our clients are going through. Our customers - it doesn't really matter by geography or by industry - are very deeply committed to their digital transformations of their businesses. I think that if the pandemic put a light on anything for them, it was that their businesses were not going to have a future if they did not go through a digital transformation.
CEOs are now digital transformation officers, he added, a point picked up by his co-CEO Bret Taylor who characterized Salesforce’s role in the vendor/buyer relationship:
It's a real trusted digital adviser relationship, where we're helping solve the problems most fundamental to the executive teams of our customers. And it's not something that's related to the pandemic; it's related to the systemic digitization of the economy. And that's something that we think is a secular trend and that is absolutely enduring, and we see it in the demand environment.
Customers
To back this up, there was much emphasis on the post-results analyst call on customer success exemplars. Taylor weighed in with examples of Slack involved in deals, highlighting PayPal as a case in point:
We've had a long relationship with [CEO] Dan Schulman in the PayPal team. He uses Customer 360 across both their B2B and their B2C businesses. This quarter, PayPal expanded their use of Slack, using new capabilities like Slack Huddles where [they have] thousands of real-time audio calls every week, and Slack Chatbots to respond to employee questions, log IT tickets and more.
Taylor also pointed to traction for Salesforce’s industry vertical clouds:
Our most strategic multi-cloud deals were driven by our industry-specific products. GEICO is a great example. GEICO is the second largest auto insurer in the US with over 25,000 agents, led by an incredible CEO in Todd Combs. Our professional services team is working with GEICO to deliver a digital-first customer experience with our Financial Services Cloud. And it's improving their customer experience and saving the company millions in costs at the same time.
Chief Revenue Officer Gavin Patterson picked up the customer theme, citing expansions of existing relationships as further evidence of ongoing growth and pointing to two exemplars:
We continue to build our relationship with Sanofi, where CEO Paul Hudson and his team were already using Health Cloud and Service Cloud. In Q4, they added Consumer Goods Cloud, Tableau CRM and Salesforce B2B Commerce, which will let them better engage with healthcare providers, patients and pharmacies around the world. This is another great example of our complete Customer 360 portfolio at work.
We also grew our partnership with Mercedes-Benz in the quarter. They're using Salesforce to transform the way they engage with their customers. And as Mercedes becomes even more sustainable and re-imagines their fleet for the electric future, they're relying on Customer 360 to unite their sales, service and marketing teams around a single shared view of each customer.
Ralph Lauren is another case in point, he argued:
We're helping Ralph Lauren deepen its connection with its customers in both digital and physical setting, particularly as they expand into new regions. In fact, Commerce Cloud is helping grow their North American online sales by over 30% in the December quarter. And throughout the pandemic, Ralph Lauren has relied on Slack to keep their geographically-distributed teams working together seamlessly from anywhere.
The future
As for what comes next, it’s a case of drilling down on what’s been achieved to date. Post-Slack, there are no plans for any mega M&A activity in the short term, but there will a continued focus on multi-cloud CEO conversations around digital transformation. Patterson noted:
The dynamics we're seeing in customer engagement are absolutely fantastic. Just over the past few months, I've done more than 75 meetings with C-Suite executives, and the accessibility, that sense of urgency and interest from the highest levels of companies, is incredible and shows no signs of slowing down. What's clear is there is a tremendous appetite for digital transformation, and we fully expect that to continue.
My take
Salesforce is 23 years old next Tuesday, a date that Benioff picked out in his comments to analysts as he said:
When we started this in 1999, I never dreamed we would have become this amazing company and entering the Fortune 100 in 2022. So this is awesome.
The growth numbers remain hugely impressive and show no indication of slowing down as might be expected over time for a company of Salesforce’s size. Benioff’s TAM comment holds up to scrutiny. The analyst presentation was heavily pinned to citations of customer success, something that we thoroughly approve of here at diginomica, given that customers are always a vendor’s most powerful proof-point.
Aside from the numbers, the new executive line-up continues to work well together. On the analyst call, it was notable that Taylor and Patterson picked up the majority of the corporate presentation and CFO Amy Weaver handled the numbers, while Benioff talked about wider topics alongside, such as the drive towards Net Zero and, most personally, the unfolding situation in Ukraine, birthplace of his great-grandfather Issac.
This is, as I’ve noted before, a very strong line-up at the top of the company. Amusingly enough, in the run up to the results announcement, I - along with many other analysts/journalists, I imagine - was offered some third party ‘expert commentary’ on what to expect from the earnings call, which seemed in large part to pivot on the notion that Taylor was now in charge of the firm’s destiny and essentially eulogising Benioff’s past achievements. Those ‘rumours of death’ are, as is traditional, greatly exaggerated, but it is certainly the case that there’s more of a multi-headed management public face to Salesforce than perhaps there’s ever been. In the words of Taylor:
As a leadership team, we've never been more aligned, and we're executing better than we've ever have.
