Salesforce's (NYSE:CRM) impending third-quarter fiscal 2019 results, scheduled to be announced on Nov 27, are likely to gain from a rapid adoption of the company's cloud-based solutions.
Notably, growth across all its four major cloud service offerings, namely Sales Cloud, Service Cloud, Platform and other, and Marketing & Commerce Cloud continue to boost the company’s subscription and support revenues, the major contributor.
The company is benefiting from a robust demand environment as customers are undergoing a major digital transformation. Moreover, the recent federal tax cut led to a robust increase in spending by enterprise, which is a tailwind for the company.
Click here to know how the company’s overall Q3 performance is likely to be.
Growing Cloud Adoption
Salesforce’s diverse cloud offerings are helping it expand clientele, thereby driving top-line growth. The rapid adoption of the SaaS-based Salesforce platform demonstrates solid demand for the company’s cloud-based solutions.
Moreover, higher enterprise spending on cloud computing is a key catalyst. Furthermore, enhancement of customer experience is aiding growth of the company’s cloud segment.
The company is actively engaged in leveraging its Sales Cloud and Marketing Cloud, and Service Cloud and Einstein to strengthen customer-centric growth across its portfolio of brands. In the last reported quarter, Sales Cloud, Service Cloud, Platform and other, and Marketing & Commerce Cloud grew 12.7%, 27.4%, 53.8% and 37.4%, respectively.
Notably, Sales Cloud service, the company’s largest contributor of subscription and support revenues, surpassed the $1 billion mark in quarterly revenues for the first time in the fiscal second quarter. For the fiscal third quarter, the Zacks Consensus Estimates for Sales Cloud revenues is pegged at $1.03 billion, indicating year-over-year growth of 13.7%.
The company is also witnessing great success with Service Cloud and Marketing Cloud. The Zacks Consensus Estimates for Service cloud revenues in the fiscal third quarter is pegged at $923 million, which is 25% higher than the figure reported in the year-ago quarter.
In the last reported quarter, the company extended its strategic alliance with Alphabet’s (NASDAQ:GOOGL) Google to deepen the integration between Google Analytics 360 and Salesforce Marketing Cloud. The Zacks Consensus Estimates for Marketing and Commerce Cloud revenues in the fiscal third quarter is pegged at $452 million, which is 30.6% higher than the figure reported in the year-ago quarter.
Moreover, continued adoption of platforms like Heroku and the Lightning is aiding Salesforce Platform revenues. In connection to this, the launch of new low-code tools in the quarter-under-review that enable users to build apps with greater speed, reflects the company's constant efforts to enhance the Lightning Platform on which the tools will run.
The Zacks Consensus Estimates for the same in the fiscal third quarter is pegged at $710 million, indicating 43.4% improvement from the figure reported in the year-ago quarter.
Zacks Ranks and Key Picks
Currently, Salesforce carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Castlight Health (NYSE:CSLT) and Upland Software (NASDAQ:UPLD) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Castlight Health and Upland Software is currently pegged at 22.5% and 20%, respectively.
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