Salesforce.com Follows Its Own Advice in the First Quarter

Salesforce.com (NYSE: CRM) made good on the guidance it gave at the start of 2019 -- and then some.

As is the cloud software company's custom, first-quarter earnings results were under-promised and over-delivered when they came out this week, and full-year estimates were increased as a result of the strong start.

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Salesforce continues to win over new customers and increase its relationship with existing ones. It's clear that the tenet of putting the customer first isn't just what Salesforce encourages its software subscribers to do -- it follows its own advice.

Q1 by the numbers

During its end-of-2019 fiscal year earnings call, Salesforce called for 20% growth during the new year. The first quarter handily surpassed that outlook and delivered more than enough good news to keep investors happy. Shares are up about 5% as of this writing since the earnings release, closing back in on the company's 52-week-high stock price of $167.56.

Also positive was the bottom line. Gross profit on software services increased again, and adjusted earnings -- which were forecast to be flat during the new fiscal year -- got off to a hot start. That comes in spite of a string of big acquisitions Salesforce made in 2018, as well as a few smaller ones so far this year. The company also spent $300 million to integrate the previously independent Salesforce.org non-profit organization with its own operations to create "strategic synergies and operational efficiency."

A big ecosystem and a long runway

Salesforce is the longtime leader in customer relationship management (CRM) software, and co-CEO Marc Benioff said during the earnings call that the lead keeps growing in the CRM department and in related disciplines. He explained:

As for MuleSoft -- Salesforce's biggest-ever purchase at $6.5 billion back in May 2018 -- the data integration software tool contributed $170 million in revenue during the quarter. This will be the last time management provides a regular update on the subsidiary, but it expressed continued confidence in the segment's growth. Digital transformation remains one of the top priorities for businesses around the globe, and adding MuleSoft to the fold continues to boost Salesforce's leadership position in helping businesses make a change.

Benioff said to look for $16.25 billion in revenue for the current fiscal year, up $200 million from the last update and good for 22% year-over-year growth. Adjusted earnings also got a bump, now estimated to be in the range of $2.88 to $2.90. That would be a 5% annual increase at the midpoint -- not great, but much better than the previous flat outlook.

However, Salesforce isn't overly focused on profits right now. It still has the pedal to the metal to maximize its opportunity and is one of the fastest-expanding big technology names out there as a result. Customer relationship and related software is still very much on the rise, and Salesforce is one of the best ways to cash in on it.

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Nicholas Rossolillo and his clients own shares of Salesforce.com. The Motley Fool owns shares of and recommends Salesforce.com. The Motley Fool has a disclosure policy.