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How Salesforce’s US Dependence Could Help It

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Largest market for public cloud

Earlier in this series, we discussed analysts’ expectations from Salesforce’s (CRM) soon-to-be-announced fiscal 4Q17 results. We also learned how the growing cloud adoption could benefit Salesforce, which generates the majority of its revenue from subscriptions. Let’s see how the United States, the largest market for the cloud, could benefit Salesforce.

According to IDC Research’s recent report, the United States (SPY) will be the largest market for the public cloud between 2015 and 2020, generating more than 60% of total global revenue. It is followed by Western Europe and APeJ (Asia-Pacific excluding Japan), which have expected spending of $24.1 billion and $9.5 billion, respectively, in 2017.

Although the United States is the largest expected market for the cloud, it is forecast to have the slowest growth of 19.9%. APeJ and Latin America are expected to have the fastest spending growth, with CAGRs (compound annual growth rates) of 28.0% and 26.6%, respectively.
Salesforce's revennue geography

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Salesforce benefits from US dependence

As the above chart shows, Salesforce derives most of its revenue from the United States. Although Salesforce has increased its investments in Europe (EFA) and Asia to expand its footprint there, the Americas will continue to dominate its revenue. In comparison, peers Microsoft (MSFT), IBM (IBM), and Oracle (ORCL) generate substantial portions of their revenue from overseas markets.

President Donald Trump has repeatedly voiced his views on immigration and taxation, and both impact the IT (information technology) sector—especially the software sector. In addition to his anti-immigration policy, Trump has planned a reduction in the current tax structure from 35% to 15% and the removal of the corporate alternative minimum tax. Salesforce’s dependence on the United States will make it one of the biggest beneficiaries of this tax revolution.

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