Customer Digital Transformation, Slack Acquisition Fuel Salesforce Growth

Slack collaboration application sales boosted Salesforce revenue by nearly $600 million in the second half of fiscal 2022 and forecasts call for Slack to add $1.5 billion to Salesforce’s top line in fiscal 2023.

Salesforce

Cloud application giant Salesforce reported a blockbuster fourth quarter to close out its fiscal 2022 with revenue growth getting a boost from customers’ digital transformation initiatives and accelerating sales of the Slack collaboration application Salesforce acquired in mid-2021.

Salesforce executives reported the company’s fiscal 2022 fourth-quarter and full-year results Tuesday on a conference call with analysts where co-CEO Marc Benioff took note of the contrast between the good news of the company’s quarterly results and the “grim and uncertain times” of Russia’s invasion of Ukraine.

“We’re not blind to what’s happening,” Benioff said, noting the difficulty of a call where Salesforce touted “perhaps the best quarter it has ever had in its history” while acknowledging “the grim things that are happening in the world.”

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Benioff noted that his great-grandfather, Isaac Benioff, was an immigrant from Kyiv, Ukraine, to the U.S. and, in reference to the people of Ukraine, said that “my heart is really breaking for them.”

Benioff said Salesforce does not do business “of any consequence” in either Russia or Ukraine and so the current situation has had no impact on the company’s business.

Benioff, however, was upbeat on developments in the COVID-19 pandemic, saying the U.S. and world is entering a “post-pandemic reality.”

“We’re really turning the corner in our battle with the virus,” he said. “I believe in many ways that COVID is behind us. We are kind of coming to another stage here and I hope we’re about to get back to a more normal world.”

Benioff noted that he is seeing “significant numbers of our employees back here in the office,” referring to Salesforce’s San Francisco’s headquarters. The co-CEO said that of the company’s current 75,000 employees, 35,000 have joined the company since the beginning of the pandemic. Benioff also said he’s seeing more signs of post-pandemic life throughout the city.

For the fiscal 2022 fourth quarter (ended Jan. 31, 2922) Salesforce reported revenue of $7.33 billion, up 26 percent from $5.82 billion in the fourth quarter of fiscal 2021. The company reported a GAAP $28 million loss for the quarter compared to net income of $267 million one year before.

For all of fiscal 2022 Salesforce reported revenue of $26.49 billion, up nearly 25 percent from $21.25 billion in fiscal 2021. GAAP net income for the year was $1.44 billion, down from $4.07 billion one year ago. Salesforce generated $6.00 billion in net cash flow in fiscal 2022, up 25 percent from $4.80 billion the previous year.

“We continue to see such tremendous, tremendous demand from customers across every industry, every geography, every product category,” Benioff said. Noting that he has met with 46 CEOs at customer companies over the last 90 days, the co-CEO said that “they’re all going through major digital transformations” and that is a key driver of their Salesforce adoption.

Bret Taylor, who was promoted to co-CEO in November, said that Salesforce’s cloud applications are “strategic” to companies that are undertaking digital transformation initiatives.

Benioff said many of those digital transformation efforts were spurred by the COVID-19 pandemic. “If the pandemic put a light on anything for [business customers], it was that their businesses were not going to have a future if they did not go through a digital transformation,” he said.

“The reality is, over the last two years, what we have seen has been incredible demand and that demand is really linked to the digital transformations that our clients are going through,” Benioff added.

The financial results included the news that Slack collaboration applications generated $312 million in revenue in the fourth quarter for Salesforce and $592 million during the second half of fiscal 2022 – the period Salesforce has owned Slack following Salesforce’s $27.7 billion acquisition of Slack on July 21, 2021.

“Slack continues to exceed our expectations in every way,” co-CEO Taylor said on the earnings call. And repeating what Salesforce executives have said during recent investor presentations, Taylor said Salesforce does not anticipate any “material” mergers or acquisitions in the near term.

“Slack is our focus,” Taylor continued, noting how that acquisition, as well as the 2018 acquisition of integration technology developer MuleSoft and the 2019 acquisition of business analytics company Tableau Software, have expanded Salesforce’s product depth and fueled its sales growth.

“Marc [Benioff] and I could not be more pleased with how the Slack integration is going,” Taylor said. “And that remains our top priority as a management team.”

Salesforce is forecasting that revenue for the current quarter (fiscal 2023 first quarter) will be in the range of $7.37 billion to $7.38 billion, a 24 percent increase from one year ago. That includes an expected contribution of $320 million from Slack.

For fiscal 2023 (ending Jan. 31, 2023) Salesforce is forecasting revenue of $32.0 billion to $32.1 billion, up 21 percent from fiscal 2022, with Slack expected to account for $1.5 billion in revenue.