Salesforce Q3 Shows Solid Results, But Rising Expenses Loom

The Organic Growth Isn’t Good Enough

This year, Salesforce proposed to its investors that it will double in revenue by 2024. This is a big goal that isn’t likely achievable through organic growth of its subscription services. This has been the catalyst for acquisitions like Tableau and Mulesoft among others.

So while the large growth this quarter that is the best in 5 years is promising, sustaining this type of organic growth is going to be really hard. This will make Salesforce even more focused on inorganic growth through acquisition if the company intends to meet its very aggressive growth targets.

Overall Impressions: Integration, Competition and A Tough Road Ahead 

Salesforce seen such strong results and market response for so long, the fact that the company YTD is trailing the S&P for growth has to be a surprise for many. 

However, the company has reached a more mature period in its existence and it now needs to realize that hyper growth through organic channels will be really challenging. This has been clearly realized through acquisitions like Mulesoft and Tableau. However, those acquisitions won’t come without challenges. This is especially true for Tableau. Given the software had a vast majority of its users on-prem, it was anything but a natural fit for Salesforce. 

As the company works to integrate Tableau, and then to keep up with growing/continued competition from the likes of Microsoft Dynamics 365, NetSuite and legacy SAP and Oracle offerings, there is also going to be an onslaught of companies that will promise the simplicity that Salesforce once offered. Companies like Zoho or Freshworks come to mind here.

If Salesforce is going to achieve its double in 5 year ambitions, it will need both organic and inorganic growth. But it’s far from a guarantee as rising expenses, difficult hybrid integration and product maturity are all going to be a challenge for the software giant.  

Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.

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Image: Salesforce

The original version of this article was first published on Futurum Research.