Salesforce’s Europe region continued its double-digit growth
Salesforce (CRM) was the most recent company in the tech sector to report its fiscal 2Q17 results this earnings season. Though Salesforce is dependent on the Americas for the bulk of its revenues, its European region reported the most growth. The region grew more than 30% on a constant currency basis for the third straight quarter in fiscal 2Q17. In fiscal 2Q17, the Americas region posted ~$1.5 billion in revenue, and the Europe (EFA) and Asia-Pacific (FAX) regions posted ~$347 million and ~$194 million, respectively.
Salesforce’s continued growth in Europe is worth mentioning, as it indicates that the company is implementing its diversification plans and has been able to reduce its dependence on the Americas. The below chart shows cloud application market growth, which is expected to grow the fastest in the APAC (Asia-Pacific and China) region, followed by Europe.
Fiscal 2Q17 earnings and operating performance
Salesforce continued its recent trend of better-than-expected revenue in fiscal 2Q17. In 2Q17, Salesforce posted revenue and non-GAAP (generally accepted accounting principle) EPS (earnings per share) of $2.0 billion and $0.24, respectively, which beat analysts’ expectations by $20 million and $0.02, respectively. Like last quarter, Salesforce reported a profit in fiscal 2Q17.
Salesforce’s fiscal 2Q17 revenues not only exceeded analysts’ expectations but exceeded the company’s guidance as well. In its fiscal 1Q17 release, it provided revenue guidance in the range of $2.01 billion–$2.02 billion. Its EPS was in line with its guidance of $0.24–$0.25. On a constant currency basis, its fiscal 2Q17 revenue grew by ~25% on a YoY (year-over-year) basis.
Salesforce’s subscription and support revenue continued to be a major contributor towards the overall revenue, as the above chart shows, in fiscal 2Q17. The subscription and support revenue was $1.9 billion, an increase of 24% on a YoY basis. Professional services, which contributed the remaining 7% of the overall revenue, grew by 33% to ~$151 million.
Unlike peers IBM (IBM) and Oracle (ORCL), which are encountering difficulties growing their revenues, Salesforce continues to report double-digit growth with each passing quarter, and fiscal 2Q17 was no different.