Salesforce sets target of $28 billion revenue by 2023 as economic confidence holds

When Workday’s internal $10 billion run rate ambitions became public last week, I opined that we were more used to such goal setting from Salesforce.

As if to validate my point, co-CEOs Marc Benioff and Keith Block yesterday upped their own targets for the CRM firm to $28 billion revenues by fiscal 2023, more than double the $13.28 billion figure at the end of fiscal 2019.

The firm turned in a strong Q4 to end the year. Net income was up 75% year-on-year to $362 million on revenues of $3.6 billion, up 26% year-on-year. By cloud offering:

• Sales Cloud was up 11% year-on-year for the quarter to top $1.1 billion and 13% for the year to $4 billion.
• Service Cloud was up 22% year-on-year for the quarter and 25% for the year to $3.6 billion.
• Platform and Other was up 54% year—on year for the quarter to $0.8 billion and 49% for the year to $2.9 billion.
• Marketing and Commerce Cloud was up 34% year-on-year for the quarter to $0.5 billion and 37% for the year to $1.9 billion.

By region, Europe, Middle East and Africa turned in the highest growth rate on 33% year-on-year to hit $2.553 million revenues for the full year. Asia Pacific was on 28% to contribute $1.284 million, while the domestic America’s market rose 24% to $9.445 million.

There’s still a lot of economic confidence fuelling investment, according to Benioff:

I continue to see incredible optimism for the year and for the economy. Those CEOs are all talking about growth and investment. And they don’t have what I would call economic anxiety, certainly not in the United States. When I was in the World Economic Forum in Europe, while I also saw a lot of confidence, European CEOs definitely have more anxiety. Yet, they are also continuing to invest aggressively.

Deal sizes are getting larger with $20 million plus contracts up 48% year-on-year, including two 9-figure renewal expansions during the quarter. Block pointed to Barclays as a case in point to illustrate the types of enterprise deals Salesforce is engaged with:

At the World Economic Forum in January, their CEO Jes Staley proudly said that with Salesforce, they have just signed the largest technology agreement in their 300-year history. We are very, very proud to be Barclays’ trusted partner in digital transformation as they deliver faster, more convenient services to their 48 million customers. I remember when our goal was to have the Top 10 banks running their business on Salesforce. Then the goal was the Top 20 banks. Well now, we do business with nearly every financial institution in the Fortune 500.

We also significantly deepened our relationship with one of the world’s largest telecommunications companies. They are leveraging Service Cloud, Marketing Cloud, Einstein and MuleSoft to personalize in-store and online engagement for more than 100 million subscribers…96% of the media and communications companies from the Fortune 500 are our customers. And this is just the beginning.

The bigger deals are being driven at top level inside customers and prospects, he added:

I was on the phone with a CEO in Australia last week who is going to bring his entire executive team all the way from Sydney to talk to us about digital transformation. So, we put ourselves in this enviable position because we’re driving transformation. We’re driving value. And they trust us. Obviously, trust is our number one value as well as far as our company goes.

Benioff in turn pointed to Italian fashion leader Brunello Cucinelli as another example of the type of CEO-level relationships that are being built:

The reason why he’s able to partner so close to Salesforce and why we become their digital transformation partner is, we’re not there for just one silo of their business, sales or service or marketing or commerce. We’re there to really help him bring his entire company together. It’s really the comprehensiveness of the solution that then yields that result for them…[they know] we’re going to be able to bring all of these assets to bear and they’re not going to have to just go to individual silo organizations within the customer segment that we’re able to bring that entire CRM solution to them.

And on the subject of tech, Benioff pointed to voice as the next great enabler:

Half of US households already have a voice activated device. It’s going to become a dominant user interface. Salesforce is no exception. We have taken these consumer voice experiences and we have brought them to our customers and make them more productive at work. Now, very, very soon, every Salesforce app that has ever been built will have Einstein available to it. The power of voice isn’t just getting information; it’s getting information into your database and into your CRM system. It has to be fully interactive. With Einstein Voice, customers will be able to update all of their data in Salesforce with voice command. AI is critical to every customer transformation. And the automation it delivers is driving the next generation of efficiency for companies. It’s also radically transformational in the nature of work. And it’s why all of the CEOs I have met with are talking about rebalancing and rescaling their workforce for the future.

My take

A strong quarter, a strong year and yet Wall Street was disappointed. It’s one of the problems of growing fast of course - scream if you want to go faster. Investors are speed freaks and any hint of a forecast that doesn’t feed the need - as Salesforce’s Q1 outlook clearly didn’t - causes pushback. That said, the firm is still looking at 20% to 21% growth in fiscal 2020, which against a macro-economic backdrop that potentially includes a ‘hard Brexit’ that might dent that impressive EMEA growth rate, is hardly shabby.