Salesforce.com inc. Earnings Cheat Sheet: Margins Shrink on Rising Costs

S&P 500 (NYSE:SPY) component salesforce.com inc. (NYSE:CRM) reported a drop to a loss in the third quarter driven by higher costs. Salesforce.com is a cloud computing company, which provides customer relationship management (NYSE:CRM) products to businesses. It offers a technology platform for Internet-based computing, storage, and connectivity solutions for customers and developers.

Investing Insights: Here’s Why Chipotle’s Stock Keeps Winning.

salesforce.com inc Earnings Cheat Sheet for the Third Quarter

Results: Reported a loss of $3.8 million (3 cents per diluted share) in the quarter. The application software company had net income of $21.1 million or 15 cents per share in the year earlier quarter.

Revenue: Rose 36.2% to $584.3 million from the year earlier quarter.

Actual vs. Wall St. Expectations: CRM fell short of the mean analyst estimate of 3 cents per share. It beat the average revenue estimate of $571.4 million.

Quoting Management: “Salesforce.com is the first enterprise cloud computing company to exceed a $2.3 billion annual revenue run rate,” said Marc Benioff, Chairman and CEO, salesforce.com. “And today, we’re excited to announce that we expect to reach a $3.0 billion annual revenue run rate during our fiscal year 2013.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 33.5%, with the biggest boost coming in the second quarter when revenue rose 38.4% from the year earlier quarter.

Gross margin shrank 2.9 percentage points to 78%. The contraction appeared to be driven by increased costs, which rose 56.5% from the year earlier quarter while revenue rose 36.2%.

The company fell short of forecasts after beating estimates in the previous two quarters. In the second quarter, it topped the mark by 4 cents, and in the first quarter, it was ahead by one cent.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the fourth quarter has moved down from 11 cents a share to 6 cents over the last ninety days. At 19 cents per share, the average estimate for the fiscal year has fallen from 24 cents ninety days ago.

Competitors to Watch: Microsoft Corporation (NASDAQ:MSFT), Google Inc. (NASDAQ:GOOG), Oracle Corporation (NASDAQ:ORCL), Servicesource Intl. Inc (NASDAQ:SREV), SAP AG (NYSE:SAP), NetSuite Inc. (NYSE:N), Intl. Business Machines Corp. (NYSE:IBM), Pegasystems Inc. (NASDAQ:PEGA), LivePerson, Inc. (NASDAQ:LPSN), and Constant Contact, Inc. (NASDAQ:CTCT).

Investing Insights: Here’s Why Chipotle’s Stock Keeps Winning.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

 

More from The Cheat Sheet