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The Empire Strikes Back

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What’s going on?

Salesforce is making the most of its unlimited power: the software empire reported a better-than-expected quarter late on Tuesday, and its shares initially rose 15% on Wednesday.

What does this mean?

Take that, analysts’ forecasts: Salesforce announced its profit was much higher than the same time last year, and revenue was up by a better-than-expected 29%. More importantly, the company’s billings – which reflect future sales not yet paid for – were up 34%. That’s more than twice the growth analysts had forecast, and bodes well for its upcoming earnings.

Speaking of which, Salesforce is expecting this quarter’s revenue to be 5% higher than analysts predicted. And while it admitted its quarterly profit might come in a bit lower, the company reckons it’ll make up for it by earning more for the rest of the year – in both revenue and profit – than analysts think.

Why should I care?

For markets: Right as rain.

Last quarter proved to be a perfect storm for Salesforce, and the company was wearing the right booties for the weather. For one thing, the pandemic drove its enterprise customers to upgrade their business-critical tech systems, leading to more new business and less customer turnover than expected. Mix in favorable currency fluctuations that boosted the company’s bottom line, and you start to see why investors were so keen to buy Salesforce shares on Wednesday. In fact, they were probably all the keener because of its better-than-expected earnings forecast – something fellow investor darling Apple opted not to make.

The bigger picture: Cloud and proud.

Another American tech company, Hewlett Packard Enterprise, reported its own stronger-than-expected quarterly update late on Tuesday, coupled with a positive forecast for this year’s earnings. Like Salesforce, Hewlett benefited from the cloud computing boom: it’s been helping customers with analytics, secure connectivity, and remote work capabilities. That’s one more company to thank for all those Zoom socials, then.

Originally Posted on August 26, 2020 – The Empire Strikes Back

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