Salesforce soars in Q1 as "counterintuitive" COVID response from CEO Marc Benioff pays off

It's digital customer transformation - that’s where the power is.

There was a decidedly celebratory tone to the post-results announcement analyst call with Salesforce yesterday - and little wonder, when CEO Marc Benioff was able to boast:

It's not just the best first quarter we've ever had; I think it's the best quarter we've ever had.

Salesforce reported revenue up 23% year-on-year to $5.96 billion for Q1 2022, with net income of $469 million, well up on the $99 million reported for the comparable period last year. Breaking the revenue figure down, by cloud:

• Sales Cloud contributed $1.4 billion, up 11% year-on-year.
• Service Cloud was up 20% year-on-year to $1.5 billion.
• Platform and Other grew 28% year-on-year to $1.7 billion.
• Marketing Cloud and Commerce Cloud were up 25% to $0.9 billion.

And by geography:

• Americas - $4.094 billion, up 21% year-on-year
• EMEA - $1.302 billion, up 26%.
• Asia Pacific - $567 million, up 23%.

Other numbers of note:

• Eight out of the top 10 deals in Q1 included Tableau, which also featured in more than 60% of seven figure plus deals.
• MuleSoft was included in five of top 10 deals, with the division now doing 4.86 billion integration transactions every day, up 28% quarter over quarter. 
• Einstein AI now does over 100 billion predictions per day.

The COVID pivot

So big numbers all round and a buoyant start to the new fiscal year, indicative of how well Salesforce pivoted to respond to the changed COVID world. The way the firm reacted was, according to Benioff, “counterintuitive”:

The world is ending! You’ve got to go all out and realize that the world is not going to be ending in a year from now. It's hard when you're in it, because people start to panic. It's a normal human reaction. I mean, we even had executives in Salesforce who came in and said, "Oh, we've got to cut. We got to do this. We have to do that."

While there was some “slight reshaping” as Benioff puts it, the main thrust was to put the foot on the pedal and move on:

We need to invest to grow. We needed to do the things that we need to do as a company…So a year ago, it was a decision based on experience, whether it was the recession of 2001 or the financial disasters of 2008. Those are just moments. They're moments in time, but in the history of the company…you've got to keep going. That moment is the time to go because, in many cases, your competitors are pulling back because they're afraid. And when your competitors are afraid, that's when you need to invest.

On the subject of competition, another big claim has been staked, one that even by the never-knowingly-undersold standards of Benioff would turn out to be a landmark one:

We're about to pass SAP as the largest enterprise applications company in the world. All the analysts have their models…I’ll tell you that it's awesome to be not just be number one in CRM, but you know, we're going to be the number one enterprise software applications company in the world, passing SAP. This is a moment and we can see it's imminent.

Customer demand

Ok, so that’s one to keep an eye on in the coming months - and I’m sure it’ll be flagged up loud and clear when/if the moment comes - but getting back to the stellar Q1 numbers, they stem, argues Benioff, from a level of customer demand unlike any he’s seen:

I've never seen so many, what I would call, emergency deployments. Usually, [customers] say, ‘Hey, we like to have this in six months, 12 months, the most 18 months’…They want instant time to value.

To support his thesis, Benioff cited a number of flagship exemplars of customer adoption of Salesforce’s portfolio of offerings, beginning with manufacturing giant Honeywell:

They've been manufacturing innovative products for more than 100 years, creating connected customer experiences, breaking down silos for their 100,000 employees globally. But with Sales Cloud, Honeywell is enabling its global sales team to manage thousands of customers and sellers from anywhere. Tableau Dashboards at Honeywell are providing their sales teams with key insights to improve their productivity. With MyTrailhead, which is our re-skilling platform, Honeywell is re-skilling  their sales team in their flow of work, increasing their performance.

And Service Cloud, together with Field Service and Experience Cloud, is enabling Honeywell to seamlessly dispatch technicians for on site product maintenance and proactive asset management and connected service partner experiences and customer experience for scheduling appointments and instantly troubleshooting problems. In fact, it was really that field service capability that helped us to amplify our relationship with Honeywell. 

Another familiar use case is longstanding Salesforce customer, Dell, which has expanded its use of various cloud offerings:

Last year, Dell partnered with Salesforce Professional Services and implemented the world's largest deployment in Sales Cloud to support sales reps and go-to-market channel partners. And with Service Cloud, Dell is also giving service agents a 360 degree view of every customer. That was so awesome to see. And they're using Marketing Cloud for B2B customer journeys. They're transforming their seller experience. It's incredible.

And finally 3M got a shout out:

Today 3M is using Customer 360 across 83 countries. And when [3M’s CEO] realized there were counterfeit masks that weren't providing the protection of 3M masks, they partnered with us to make sure we could immediately deliver a fraud reporting center with Service Cloud. We did it, it was an awesome story. And we had to do it instantly, immediately. 3M is also piloting Tableau to create a single dashboard for their entire business. Tableau continues to be a strategic part of so many of our customers business.

My take

Another few years, we're going to be doing $50 billion, by fiscal year '26. 

Yesterday’s analyst call saw a very upbeat Marc Benioff in full flow. In fact, after a year of earnest presentations against a backdrop of COVID, the term that sprang to mind was ‘positively giddy’. And, as noted, there’s plenty in those Q1 numbers to be giddy about.

Something else that leapt out was the credit afforded to Chief Revenue Officer Gavin Patterson and his work on overhauling the sales operation. Benioff has had a lot of right hand men and women over the years, all of whom have played their part in growing the company to where it is today. But Patterson has come in to his role against the backdrop of a global pandemic that upturned every certainty that businesses had and he's clearly played a highly significant part in enabling Salesforce not only to adapt to those changed circumstances, but to thrive.

It was interesting also to see the tip of the hat to new CFO Amy Weaver and her work on operating margins - currently running at over 20%. According to Benioff:

She's really kind of almost redesigning the company from the bottom up.

With Chief Operating Officer Brett Taylor alongside as well, driving the product direction, it’s hard to escape the conclusion - with no disrespect to anyone who’s come before - that this is one of the most potent executive line-ups that Salesforce has had in its more-than-two-decades history.

And then there’s the other obvious reason for the upbeat CEO exuberance - Dreamforce is back. The biggest event in the Salesforce calendar was inevitably canned last year for obvious reasons. Over the past 12 months, Salesforce has been one of the more successful companies in terms of putting on strong virtual events - even if a recent washed-out Washington gig left me convinced that Benioff might need to announce Rain Cloud to add to the product portfolio! - but Dreamforce as a physical phenomenon has been sorely missed.

It won’t be the same city closing jamboree as it has been in previous years, of course, and everything will be done with health and safety in mind. (Full marks at this point to the unequivocal insistence on Benioff’s part that all attendees must be doubled-vaccinated! As events open up again in the real world, it’s to be hoped that others follow this lead.) But the point is, Dreamforce is back - and that’s one small sign of a return to something approaching normality!