Partnerships & Buyouts To Drive Salesforce (CRM) Q3 Earnings

Salesforce.com, Inc. (NYSE:CRM) is set to report third-quarter fiscal 2018 results on Nov 21. The Zacks Consensus Estimate for the quarter is pegged at 37 cents, representing a year-over-year increase of a whopping 52%. Additionally, analysts polled by Zacks project revenues of roughly $2.65 billion, up 23.5% from the year-ago quarter.

Let’s see what’s driving this overwhelming expectation.

Amazon Partnership Stoking International Growth

For the last few years, Salesforce has been keen on building partnerships to expand its international operations. Its partnership with Amazon’s Amazon Web Services (AWS) is very crucial and the company, during its last earnings conference call, stated that the collaboration has helped it gain businesses overseas.

It should be noted that earlier Salesforce used to run its software at the company’s data centers, which was curbing its growth potential. However, last year, the company decided to utilize the AWS data center’s geographical reach to expand its international business. In addition, Salesforce plans to invest about $400 million on AWS’ cloud platform, over the next four years.

In the last few months, Salesforce has entered into an agreement with AWS to run its software in the latter’s Canadian and Australian data centers. This has opened up fresh prospects in the Canadian and Asia-Pacific markets.

During the fiscal second quarter, the company won several deals due to its international expansion initiatives. Companies like Toshiba, Nomura, Queensland Urban Utilities and Australia Post picked Salesforce’s solutions to fuel digital transformation. It is most likely that the company will continue winning international deals which will drive its fiscal third-quarter top- and bottom-line results.

Salesforce.com Inc Price and EPS Surprise

Salesforce.com Inc Price and EPS Surprise | Salesforce.com Inc Quote

Acquisitions Driving Revenues

Acquisitions have always been one of Salesforce’s key growth strategies. Over the last two years, the company closed a number of takeovers worth a combined deal value of more than $4 billion. Last year alone, the company made as many as 12 takeover deals, including its biggest ever buyout — Demandware — concluded in July 2016. These acquisitions have strengthened its position in the customer relationship management (CRM) solution providing space. We expect the acquisition synergies to drive Salesforce’s fiscal third-quarter top-line performance.

Salesforce Partner Program Adding Customers

Tremendous growth in Salesforce partner certifications has been fueling the company’s top-line results. During its fiscal second-quarter conference call, Salesforce announced that its partner certification witnessed growth of five times over the last four years, and more companies are willing to invest in Salesforce activities. Accenture (NYSE:ACN) has emerged as one of the biggest examples for this. Notably, Accenture is currently a global leader in the Salesforce implementation service space, with over 11,000 skilled consultants.

Notably, a number of big organizations, including Amazon (NASDAQ:AMZN) , 21st Century Fox, Jefferies Investment Bank and Samsung (KS:005930), picked Salesforce solutions during the fiscal second quarter to drive their digital transformation. Analysts covering the stock believe that the fiscal third quarter will witness the same trend, thereby bolstering its top-line performance.

Furthermore, during the fiscal second quarter, Salesforce broke through the $10-billion run rate and named itself the first company in the history of enterprise cloud software industry to have achieved this milestone so fast, including its closest rivals like Microsoft (NASDAQ:MSFT) , Oracle (NYSE:ORCL) and SAP SE (DE:SAPG).

Currently, Salesforce carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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