Marketing Cloud Growth Bolsters Salesforce Revenue

Salesforce announced a net loss of $9.2 million for the first quarter after hours on Thursday, a year after the company posted a profit of $38.7 million in the first quarter of 2016.

Even with the net loss, however, Salesforce unveiled impressive revenue growth figures -- so much so that the company now predicts it will make $100 million more for the year than the cloud titan expected just last quarter.

Revenue for the first quarter of 2017 increased 25% to $2.4 billion, while deferred revenue has grown 26% year-over-year to $5 billion, according to the company’s financial report.

The Sales Cloud is the largest among Salesforce’s cloud-based software services, yet revenue from the Salesforce Sales Cloud still grew by 14.5% to $829.6 million. The company’s Service Cloud also jumped 20.6% to $651.2 million.

Revenue from the Salesforce Marketing Cloud experienced the largest surcharge, growing 56% to $289 million.

“We continue to see marketing technology taking share of marketers’ overall budgets to better capitalize on customer relationships, automate workflows and apply related data towards improved media choices,” states Brian Wieser, senior research analyst of advertising at the Pivotal Research Group. “ is a key catalyst and beneficiary of these changes within the industry. Our updated price target on CRM stock is $83 on a calendar YE2017 basis, and we continue to rate the stock Hold.”

The Marketing Cloud houses Salesforce’s email and advertising solutions, an area that Salesforce has invested heavily in via acquisition.

“This segment benefitted from the acquisitions of Krux and Demandware,” states Weiser. “Excluding Demandware, growth was +32%, and excluding Krux, growth was likely in the high ‘teens or low ‘20s.”

Although acquisitions have bolstered Salesforce’s arsenal, it can also pose a risk to profitability. Integrating two separate technology products requires time, resources, and engineering prowess.

“Integration risks and growing pains associated with acquisitions are also worth noting,” states Weiser. 

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