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Salesforce's strong results allay slowing growth concerns
May 18, 2017 / 8:22 PM / 2 months ago

Salesforce's strong results allay slowing growth concerns

3 Min Read

The Salesforce logo is pictured on a building in San Francisco, California, U.S. October 12, 2016.Lily Jamali

(Reuters) - Salesforce.com Inc (CRM.N) allayed concerns about a slowing pace of growth after it reported quarterly deferred revenue that came above its estimate on Thursday.

The company's deferred revenue rose 26 percent to $5.04 billion in the first quarter ended April 30.

In February, Salesforce had warned of a steeper drop in first-quarter deferred revenue, blaming seasonality as customers typically make purchasing decisions toward the end of the year.

The metric is keenly watched by investors as subscription-based software companies such as Salesforce book revenue in stages rather than at the time of a sale.

Analysts had expected deferred revenue of $4.93 billion, according to financial data and analytics firm FactSet StreetAccount, while the company had forecast 22 to 23 percent growth.

Revenue from sales cloud, the company's flagship product, rose 14.5 percent to $829.6 million in the first quarter ended April 30.

Demand for web-based software products is red hot as companies are increasingly opting for such services to take advantage of competitive prices and their ease of scalability.

However, the sector is also witnessing fierce competition, with some of the biggest technology companies, including Microsoft Corp (MSFT.O) and Oracle Corp (ORCL.N), vying for a piece of the pie.

Microsoft reported a revenue growth rate for Dynamics 365, its competitor to Salesforce's software, for the first time in its latest quarter.

Salesforce said it expected a full-year adjusted profit of $1.28 to $1.30 per share and revenue of $10.25 billion to $10.30 billion.

Analysts on average were expecting a profit of $1.29 per share on revenue of $10.19 billion, according to Thomson Reuters I/B/E/S.

The company reported net loss of $9.2 million, or 1 cent per share, in the latest quarter, compared with a profit of $38.8 million, or 6 cents per share, a year earlier.

Revenue rose 24.6 percent to $2.39 billion, while adjusted earnings were 28 cents per share.

Analysts had estimated earnings of 26 cents per share, excluding items, on revenue of $2.35 billion for the latest quarter.

Shares of the company were up nearly 2 percent in extended trading. Up to Thursday's close of $87.75, Salesforce's shares had risen 28.2 percent this year, outperforming the 5.7 percent gain in the broader S&P 500 index .SPX.

Reporting by Aishwarya Venugopal in Bengaluru; Editing by Anil D'Silva

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