Jun
04
2020
--

SaaS earnings rise as pandemic pushes companies more rapidly to the cloud

As the pandemic surged and companies moved from offices to working at home, they needed tools to ensure the continuity of their business operations. SaaS companies have always been focused on allowing work from anywhere there’s access to a computer and internet connection, and while the economy is reeling from COVID-19 fallout, modern software companies are thriving.

That’s because the pandemic has forced companies that might have been thinking about moving to the cloud to find tools what will get them there much faster. SaaS companies like Zoom, Box, Slack, Okta and Salesforce were there to help; cloud security companies like CrowdStrike also benefited.

While it’s too soon to say how the pandemic will affect work long term when it’s safe for all employees to return to the office, it seems that companies have learned that you can work from anywhere and still get work done, something that could change how we think about working in the future.

One thing is clear: SaaS companies that have reported recent earnings have done well, with Zoom being the most successful example. Revenue was up an eye-popping 169% year-over-year as the world shifted in a big way to online meetings, swelling its balance sheet.

There is a clear connection between the domestic economy’s rapid transition to the cloud and the earnings reports we are seeing — from infrastructure to software and services. The pandemic is forcing a big change to happen faster than we ever imagined.

Big numbers

Zoom and CrowdStrike are two companies expected to grow rapidly thanks to the recent acceleration of the digital transformation of work. Their earnings reports this week made those expectations concrete, with both firms beating expectations while posting impressive revenue growth and profitability results.

Jun
02
2020
--

Remote work helps Zoom grow 169% in one year, posting $328.2M in Q1 revenue

Today after the bell, video-chat service Zoom reported its Q1 earnings. The company disclosed that it generated $328.2 million in revenue, up 169% compared to the year-ago period. The company also reported $0.20 per-share in adjusted profit during the three-month period.

Analysts, as averaged by Yahoo Finance, expected Zoom to report $202.48 million in revenue, and a per-share profit of $0.09. After its earnings smash, shares of Zoom were up slightly Update: Zoom shares are now up 2.3% ahead of its earnings call; investors had priced in this outsized-performance, it seems.

Zoom grew 78% in its preceding quarter on an annualized basis. The company’s growth acceleration is notable.

Investors were expecting big gains. Before its earnings, shares in the popular business-to-business service were up by more than 3x during the year; Zoom has found itself in an updraft due in part to COVID-19 driving workers and others to stay home and work remotely. Zoom’s software has also seen large purchase amongst consumers hungry for a video chatting solution that was simple and that works.

If the company could sustain its valuation gains going into this earnings report was an open question that has now been answered.

Gains

Zoom’s growth in its Q1 fiscal 2021 generated some notable profit results for the firm. The firm’s net income, an unadjusted profit metric, rose from $0.2 million in the year-ago quarter to $27.0 million in its most recent three months.

And Zoom’s cash generation was astounding. Here’s how the company described its results:

Net cash provided by operating activities was $259.0 million for the quarter, compared to $22.2 million in the first quarter of fiscal year 2020. Free cash flow was $251.7 million, compared to $15.3 million in the first quarter of fiscal year 2020.

It’s difficult to recall another company that has managed such growth in cash generation in such a short period of time, driven mostly by operations and not other financial acts. Zoom’s customer numbers were similarly sharp, with the firm reporting that it had 265,400 customers with more than 10 seats (employees) at the end of the quarter, which was up 354% from the year-ago period.

Though not all news for Zoom was good. Indeed, the company’s gross margin fell sharply in the quarter, compared to its year-ago result. In is Q1 fiscal 2020, Zoom reported a gross margin of around 80%. In its most recent quarter that number slipped to around 68%. In short, the company managed to convert many free users to paying customers, but still had to carry the costs of free usage of its product, something that has exploded in recent months.

Looking ahead, Zoom expects the current quarter to be another blockbuster period. The company noted in its release that it expects “between $495.0 million and $500.0 million” in revenue for Q2 of its fiscal 2021 (the current period). Looking ahead for the full fiscal year, Zoom anticipates revenues “between $1.775 billion and $1.800 billion,” numbers that take into account “the demand for remote work solutions for businesses” and “increased churn in the second half of the fiscal year” when some customers might no longer need Zoom if they can return to their offices.

Its shares might have priced in these results, but the numbers themselves are simply massive. Just three months ago Zoom turned in revenues of just $188.3 million. That’s less than it generated in free cash flow during its next three months.

May
29
2020
--

Salesforce stock is taking a hit today after lighter guidance in yesterday’s earning’s report

In spite of a positive quarter with record revenue that beat analysts’ estimates, Salesforce stock was taking a hit today because of lighter guidance. Wall Street is a tough audience.

The stock was down $8.29/share, or 4.58%, as of 2:15 pm ET.

The guidance, which was a projection for next quarter’s earnings, was lighter than what the analysts on Wall Street expected. While Salesforce was projecting revenue for next quarter in the range of $4.89 to $4.90 billion, according to CNBC, analysts had expected $5.03 billion.

When analysts see a future that is a bit worse than what they expected, it usually results in a lower stock price, and that’s what we are seeing today. It’s worth noting that Salesforce is operating in the same economy as everyone else, and being a bit lighter on your projections in the middle of a pandemic seems entirely understandable.

In yesterday’s report, CEO Marc Benioff indicated that the company has been offering some customers some flexibility around payment as they navigate the economic fallout of COVID-19, and the company’s operating cash took a bit of a hit because of this.

“Operating cash flow was $1.86 billion, which was largely impacted by delayed payments from customers while sheltering in place and some temporary financial flexibility that we granted to certain customers that were most affected by the COVID pandemic,” president and CFO Mark Hawkins explained in the analyst call.

Still, the company reported revenue of $4.87 billion for the quarter, putting it on a run rate of $19.48 billion.

In a statement, David Hynes, Jr. of Canaccord Genuity remained high on Salesforce. “If you step back and think about what Salesforce is actually providing, tools that help businesses get closer to their customers are perhaps more important than ever in a slower-growth, socially distanced world. We have long reserved a spot for CRM among our top names in large cap, and we feel no differently about that view after what we heard last night. This is a high-quality firm with many levers to growth, and as such, we believe CRM is a good way to get a bit of defensive exposure to the favorable trends at play in software.”

The company is, after all, still firmly on the path to $20 billion in revenue. As Hynes points out, overall the kinds of tools that Salesforce offers should remain in demand as companies look for ways to digitally transform much more rapidly in our current situation, and look to companies like Salesforce for help.

May
06
2020
--

Equinix just recorded its 69th straight positive quarter

There’s something to be said for consistency through good times and bad, and one company that has had a staggeringly consistent track record is international data center vendor, Equinix. It just recorded its 69th straight positive quarter, according to the company.

That’s an astonishing record, and covers over 17 years of positive returns. That means this streak goes back to 2003. Not too shabby.

The company had a decent quarter, too. Even in the middle of an economic mess, it was still up 6% YoY to $1.445 billion and up 2% over last quarter. The company runs data centers where companies can rent space for their servers. Equinix handles all of the infrastructure providing racks, wiring and cooling — and customers can purchase as many racks as they need.

If you’re managing your own servers for even part of your workload, it can be much more cost-effective to rent space from a vendor like Equinix than trying to run a facility on your own.

Among its new customers this quarter are Zoom, which is buying capacity all over the place, having also announced a partnership with Oracle earlier this month, and TikTok. Both of those companies deal in video and require lots of different types of resources to keep things running.

This report comes against a backdrop of a huge increase in resource demand for certain sectors like streaming video and video conferencing, with millions of people working and studying at home or looking for distractions.

And if you’re wondering if they can keep it going, they believe they can. Their guidance calls for 2020 revenue of $5.877-$5.985 billion, a 6-8% increase over the previous year.

You could call them the anti-IBM. At one point Big Blue recorded 22 straight quarters of declining revenue in an ignominious streak that stretched from 2012 to 2018 before it found a way to stop the bleeding.

When you consider that Equnix’s streak includes the period of 2008-2010, the last time the economy hit the skids, it makes the record even more impressive, and certainly one worth pointing out.

May
01
2020
--

In spite of pandemic (or maybe because of it), cloud infrastructure revenue soars

It’s fair to say that even before the impact of COVID-19, companies had begun a steady march to the cloud. Maybe it wasn’t fast enough for AWS, as Andy Jassy made clear in his 2019 Re:invent keynote, but it was happening all the same and the steady revenue increases across the cloud infrastructure market bore that out.

As we look at the most recent quarter’s earnings reports for the main players in the market, it seems the pandemic and economic fall out has done little to slow that down. In fact, it may be contributing to its growth.

According to numbers supplied by Synergy Research, the cloud infrastructure market totaled $29 billion in revenue for Q12020.

Image Credit: Synergy Research

Synergy’s John Dinsdale, who has been watching this market for a long time, says that the pandemic could be contributing to some of that growth, at least modestly. In spite of the numbers, he doesn’t necessarily see these companies getting out of this unscathed either, but as companies shift operations from offices, it could be part of the reason for the increased demand we saw in the first quarter.

“For sure, the pandemic is causing some issues for cloud providers, but in uncertain times, the public cloud is providing flexibility and a safe haven for enterprises that are struggling to maintain normal operations. Cloud provider revenues continue to grow at truly impressive rates, with AWS and Azure in aggregate now having an annual revenue run rate of well over $60 billion,” Dinsdale said in a statement.

AWS led the way with a third of the market or more than $10 billion in quarterly revenue as it continues to hold a substantial lead in market share. Microsoft was in second, growing at a brisker 59% for 18% of the market. While Microsoft doesn’t break out its numbers, using Synergy’s numbers, that would work out to around $5.2 billion for Azure revenue. Meanwhile Google came in third with $2.78 billion.

If you’re keeping track of market share at home, it comes out to 32% for AWS, 18% for Microsoft and 8% for Google. This split has remained fairly steady, although Microsoft has managed to gain a few percentage points over the last several quarters as its overall growth rate outpaces Amazon.

Apr
30
2020
--

AWS hits $10B for the quarter putting it on a $40B run rate

AWS, the cloud arm of Amazon, would be a pretty successful business on its own. Today, the company announced it has passed $10 billion for the quarter, putting the cloud business on an impressive run rate of more than $40 billion.

It was a bright spot for the company in an earnings report that saw it report net income of $2.5 billion, down $1 billion from a year ago.

Still, most companies would take that for the entire business, but AWS, which started off as kind of a side hustle for Amazon back in 2006, has grown into a powerful business all on its own. With a growth rate of 33%, it’s still growing briskly, even if it’s slowing down a bit as the law of large numbers begins to work against it.

Even though Microsoft has grown more quickly — in yesterday’s report Microsoft reported that Azure was growing at a 59% clip — AWS had such a big head start and controls a big chunk of the market share.

To give you a sense of how quickly this business has grown, Bloomberg’s Jon Erlichman tweeted the Q1 numbers for AWS since 2014, and it’s pretty amazing growth:

In 2014, it was a $4 billion a year business. Today it is 9.1x that and still going strong. The good news for everyone involved is that this is a huge market, and while nobody could ever characterize the pandemic and it’s economic fall-out as good news for anyone, the fact is that it is forcing companies to move to the cloud faster than they might have wanted to go.

That should bode well for all the cloud infrastructures vendors, even as the economy shrinks, the kinds of services these vendors offer should be in more demand than ever, and that means these numbers could just keep growing for some time.

Feb
26
2020
--

As Block exits, Salesforce forecasts it will surpass $20B in revenue in FY2021

When Keith Block joined Salesforce from Oracle in 2013, the CRM giant was already a successful SaaS vendor on a billion dollar quarterly revenue cadence. When the co-CEO announced he was stepping down yesterday, the company reported revenue of $4.9 billion for the quarter.

During his tenure, the company’s revenue more than quadrupled, earning an impressive $17.1 billion last year, and as Block announced at the earnings call, the company he was leaving was forecasting revenue of $21 billion for FY2021.

Consider that it was not that long ago in May 2017 that we wrote about the company reaching the $10 billion mark. It’s perilously easy to get lost in these numbers, to take them for granted and think they don’t mean as much as they do. It’s hard work to build a billion SaaS business, never mind $10 billion or $20 billion.

Yet Salesforce is embarking on unchartered territory for a SaaS company. It’s approaching $20 billion in revenue for a single year.

Growth through acquisition

Granted the company keeps growing revenue by making big deals like buying Mulesoft for $6.5 billion in 2018 or Tableau for $15.7 billion in 2019, or just this week buying Vlocity for a mere $1.33 billion. That means the company spent more than $25 billion over a couple of years to buy substantial companies that help them build their business.

Block took a moment to brag a bit about his accomplishments including how some of those purchases performed during his swan song call with Salesforce, calling it a capstone of his time at Salesforce.

“In Q4, we grew 32% in the Americas, 28% in APAC and 47% in EMEA in constant currency. Now that includes our recent acquisitions. And at the close of FY 2020, the number of Salesforce customers spending $20 million annually grew 34%,” he said.

Think about that last number for just a minute. This a SaaS vendor with the number of customers spending $20 million growing by 34%. Block helped orchestrate that growth and worked with the executive team to help determine which companies it should be targeting.

At a press conference in 2016 at Dreamforce, he discussed Salesforce’s acquisition strategy. At the time, it had bought a 10 of 12 companies it would end up acquiring that year. It would buy only one in 2017, before revving up again 2018. Here’s what he said about what they look for in a company, as we reported in an article at the time:

“We look at culture. Will it be a good cultural fit? Is it a good product fit? Is there talent? Is there financial value? What are the risks of assimilating the company into our company,” Block explained.

What’s next for Block?

There is no word on what Block will do next beyond acting as an advisor to his former co-CEO Marc Benioff, who took time in the earnings call to thank his colleague for his time at Salesforce. As well, he should.

As Ray Wang, founder and principal analyst point out, Block leaves a big hole as he steps away. “If there is no equivalent replacement, you will see a significant impact in sales. Keith brought industries and sales discipline,” Wang told TechCrunch

It will be interesting to watch what he does next, and who, if anyone, will benefit from his vast experience helping to build the most successful pure SaaS company on the planet.

Feb
14
2020
--

Alibaba Cloud revenue reaches $1.5B for the quarter on 62% growth rate

Alibaba issued its latest earnings report yesterday, and the Chinese eCommerce giant reported that cloud revenue grew 62 percent to $1.5 billion U.S., crossing the RMB10 billion revenue threshold for the first time.

Alibaba also announced that it had completed its migration to its own public cloud in the most recent quarter, a significant milestone because the company can point to its own operations as a reference to potential customers, a point that Daniel Zhang, Alibaba executive chairman and CEO, made in the company’s post-earnings call with analysts.

“We believe the migration of Alibaba’s core e-commerce system to the public cloud is a watershed event. Not only will we ourselves enjoy greater operating efficiency, but we believe, it will also encourage others to adopt our public cloud infrastructure,” Zhang said in the call.

It’s worth noting that the company also warned that the Coronavirus gripping China could have impact on the company’s retail business this year, but it didn’t mention the cloud portion specifically.

Yesterday’s revenue report puts Alibaba on a $6 billion U.S. run rate, good for fourth place in the cloud infrastructure market share race, but well behind the market leaders. In the most recent earnings reports, Google reported $2.5 billion in revenue, Microsoft reported $12.5 billion in combined software and infrastructure revenue and market leader AWS reported a tad under $10 billion for the quarter.

As with Google, Alibaba sits well in the back of the pack, as Synergy Research’s latest market share data shows. The chart was generated before yesterday’s report, but it remains an accurate illustration of the relative positions of the various companies.

Alibaba has a lot in common with Amazon. Both are eCommerce giants. Both have cloud computing arms. Alibaba, however, came much later to the cloud computing side of the house, launching in 2009, but really only beginning to take it seriously in 2015.

At the time, cloud division president Simon Hu boasted to Reuters that his company would overtake Amazon in the cloud market within 4 years. “Our goal is to overtake Amazon in four years, whether that’s in customers, technology, or worldwide scale,” he said at the time.

They aren’t close to achieving that goal, of course, but they are growing steadily in a hot cloud infrastructure market. Alibaba is the leading cloud vendor in China, although AWS leads in Asia overall, according to the most recent Synergy Research data on the region.

Jan
22
2020
--

IBM snaps out of its revenue doldrums, breaking a five-quarter losing streak in Q4

International Business Machines is living a case study of a large, established company vying to transform. Over the last decade, the technology elder has struggled to move into areas like cloud and AI. IBM has leaned on a combination of its own R&D abilities and deep pockets to push into modern markets, but has struggled to turn them into revenue growth.

At one point, Big Blue posted 22 sequential quarters of falling revenue, a mind-boggling testament to how hard it can be to turn around a juggernaut. More recently, IBM shrank for another five consecutive quarters, a streak it broke with yesterday’s news that it had beat analyst expectations. 

The quarter brought modest, but welcome revenue growth. Perhaps more importantly, the company’s top line expansion was co-led by the old IBM mainframe business and its newest champion, Red Hat.

IBM can be happy for the positive financial news, for now at least, but it needs to repeat the result. The challenge it faces moving forward will include finding a way to continue revenue growth while modernizing its product line and ensuring that its huge Red Hat purchase continues to perform.

Dec
13
2019
--

Adobe turns it up to 11, surpassing $11B in revenue

Yesterday, Adobe submitted its quarterly earnings report — and the results were quite good. The company generated a tad under $3 billion for the quarter, at $2.99 billion, and reported that revenue exceeded $11 billion for FY 2019, its highest-ever mark.

“Fiscal 2019 was a phenomenal year for Adobe as we exceeded $11 billion in revenue, a significant milestone for the company. Our record revenue and EPS performance in 2019 makes us one of the largest, most diversified, and profitable software companies in the world. Total Adobe revenue was $11.17 billion in FY 2019, which represents 24% annual growth,” Adobe CEO Shantanu Narayen told analysts and reporters in his company’s post-earnings call.

Adobe made a couple of key M&A moves this year that appear to be paying off, including nabbing Magento in May for $1.7 billion and Marketo in September for $4.75 billion. Both companies fit inside its “Digital Experience” revenue bucket. In its most recent quarter, Adobe’s Digital Experience segment generated $859 million in revenue, compared with $821 million in the sequentially previous quarter.

Obviously buying two significant companies this year helped push those numbers, something CFO John Murphy acknowledged in the call:

Key Q4 highlights include strong year-over-year growth in our Content and Commerce solutions led by Adobe Experience Manager and success with cross-selling and up-selling Magento; Adoption of Adobe Experience Platform, Audience Manager and Real-Time CDP in our Data & Insights solutions; and momentum in our Marketo business, including in the mid-market segment, which helped fuel growth in our Customer Journey Management solutions.

All of that added up to growth across the Digital Experience category.

But Adobe didn’t simply buy its way to new market share. The company also continued to build a suite of products in-house to help grow new revenue from the enterprise side of its business.

“We’re rapidly evolving our CXM product strategy to deliver generational technology platforms, launch innovative new services and introduce enhancements to our market-leading applications. Adobe Experience Platform is the industry’s first purpose-built CXM platform. With real-time customer profiles, continuous intelligence and an open and extensible architecture, Adobe Experience Platform makes delivering personalized customer experiences at scale a reality,” Narayan said.

Of course, the enterprise is just part of it. Adobe’s creative tools remain its bread and butter, with the creative tools accounting for $1.74 billion in revenue and Document Cloud adding another $339 million this quarter.

The company is talking confidently about 2020, as its recent acquisitions mature and become a bigger part of the company’s digital experience offerings. But Narayan feels good about the performance this year in digital experience: “When I take a step back and look at what’s happened during the year, I feel really good about the amount of innovation that’s happening. And the second thing I feel really good about is the alignment across Magento, Marketo and just call it the core DX business in terms of having a more unified and aligned go-to-market, which has not only helped our results, but it’s also helped the operating expense associated with that business,” he said.

It is no small feat for any software company to surpass $11 billion in trailing revenue. Consider that Adobe, which was founded in 1982, goes back to the earliest days of desktop PC software in the 1980s. Yet it has managed to transform into a massive cloud services company over the last five years under Narayan’s leadership.

Powered by WordPress | Theme: Aeros 2.0 by TheBuckmaker.com