- As part of Salesforce’s massive, 170,000-person tech conference that kicks off in San Francisco this week, the company will have an investors’ day.
- Ahead of that event, Salesforce on Monday gave a forecast for its fiscal 2019 revenue, ranging between $US12.45 billion and $US12.5 billion.
- CEO Marc Benioff has been talking since 2016 of becoming a $US20 billion in revenue company and it won’t do that anytime soon. But it still expects to grow by 20% next year.
Salesforce issued an unusual press release on Monday just as its famous billionaire founder CEO hit the stage in San Francisco to open its mega-tech conference Dreamforce.
The press release says that Salesforce expects to finish its next fiscal year with between $US12.45 billion and $US12.5 billion in revenue. It will wrap up its fiscal 2019 year in January, 2019. This is the first official time that Salesforce has given guidance for 2019.
As for the current year, fiscal year 2018, Salesforce expects to finish at between $US10.35 billion and $US10.40 billion in annual revenue. That means it expects to grow by about 20% next year, it said.
The sales forecast is about on par with what analysts expected for 2019, according to Yahoo finance, which had analysts on average predicting $US12.46 billion.
The odd thing about the announcement is that revenue predictions are typically done when a company reports earnings. And Salesforce is scheduled to reports its third-quarter, 2018, earnings in just a couple of weeks, on November 21.
A great talking point for the CEO
So why not wait? Because CEO Marc Benioff loves to talk about how rapidly his company is growing and, as part of its 170,000-person strong tech conference this week, he will be holding an investors’ day on Tuesday.
At that investors’ day, he’s almost certainly going to be asked about revenue predictions. Benioff has been talking up hitting the $US20 billion mark since 2016, promising Salesforce would become a $US20 billion company faster than any other enterprise software company in history.
At the current rate of revenue growth, the $US20 billion is still a few years off.
Benioff’s crystal ball
But there’s one more unusual thing about this way-off prediction: Companies tend to be cautious with their predictions, usually guiding ahead short distances: the next quarter or, possibly, the end of the current fiscal year. They don’t usually crystal-ball-it all the way to the end of the following year.
But, because Salesforce is a cloud company, it can predict it’s revenues a bit better than other tech companies. That’s because cloud companies don’t recognise revenue at the time they make the sale. They recognise it only after the service has been delivered and billed. That means that Benioff knows how much revenue he’s already got under contract for 2019 via multi-year contracts, and he can be confident about 2019 even from this early date.
It also means he’s given himself room to keep upping those revenue predictions as his enormous sales team continues to sell stuff next year. That always makes investors happy.
Given that the guidance is inline with the Street’s predictions, investors are mildly happy with the heads up for 2019. The stock has ticked up just a tiny bit in after-hours trading.