CRM platform provider, Inc. (CRM – Analyst Report) reported better-than-expected third-quarter fiscal 2015 results wherein both the top and bottom-line figures surpassed the Zacks Consensus Estimate and improved year over year. The improvement in earnings was primarily driven by strong revenue growth and lower operating expenses.


Salesforce’s revenues of $1.38 billion not only increased 28.6% from the year-ago quarter but also beat the Zacks Consensus Estimate of $1.37 billion. Reported revenues also beat management’s guided range of $1.365 to $1.370 billion. The year-over-year improvement was primarily attributed to rapid adoption of the company’s cloud-based solutions and the ExactTarget acquisition.

Also, higher demand for Salesforce ExactTarget Marketing Cloud platform, part of the Salesforce1 Customer Platform, contributed to the year-over-year revenue jump.

During the quarter, the company’s cloud-based solutions were selected by a number of companies including EMC Corporation, Verizon Communications Inc. and General Electric Company.

Among its business segments, revenues from Subscription and Support increased 28.3% from the year-ago quarter to $1.29 billion. Professional Services and Other revenues increased 33% on a year-over-year basis to $95.1 million.

Geographically, the company witnessed revenue growth of 29.4% in the Americas, while revenues from Europe and Asia increased 29.8% and 21.2%, respectively, on a year-over-year basis.

Operating Results

Salesforce’s adjusted gross profit (including stock-based compensation but excluding amortization expenses) came in at $1.07 billion, up 27.2% from the year-ago quarter. However, gross margin contracted 83 basis points (bps) to 77.4% from the year-ago quarter, primarily due to increased investment in infrastructure development which also include expansion of international data center.

Adjusted operating expenses (including stock-based compensation but excluding amortization of acquisition-related intangibles) increased 18.7% from the year-ago quarter to $1.06 billion, primarily due to higher investments in research and development, marketing and sales and general and administrative activities. However, as a percentage of revenues, operating expenses contracted 634 bps from the year-ago quarter to 76.4%.

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