Salesforce.com's (CRM) future is cloudy, and that is a good thing for the country's largest cloud-computing-solutions provider.
Salesforce's shares were spiking nearly 12% in early market trading Thursday after the company reported strong fiscal fourth-quarter results after the closing bell on Wednesday. The company's bottom line was in line with Wall Street's earnings estimates. Salesforce also raised its full-year revenue guidance to match the raised expectations for its Web sales and marketing software platforms.
"We hit an all-time high in large transactions in fiscal 2016 as more and more companies look to Salesforce as their trusted advisor. The tremendous response to our customer success platform is driving exceptional growth for Salesforce across every region, every cloud and every industry," said COO Keith Block in the company's earnings report.
The company now expects full-year revenue to increase between 21% and 22% year over year to between $8.08 billion and $8.12 billion.
While the company's strong fourth quarter showing may have taken some analysts by surprise, Real Money's Jim Cramer said that the signs of the Salesforce's ascent were apparent.
"I can't believe how wrong most analysts were about a fabulous quarter right in front of them, and instead decided to focus on the weakness of competitors that weren't competitors and colleagues that weren't colleagues," wrote Cramer. "Their commentary was valueless, at best. What does it say? I think many of these analysts are just guessing. If some had made just a few calls, they wouldn't have missed gigantic deals and a huge takeaway of business in Europe."
One reason why the company's results blindsided the market was the decline of its legacy competitors, Oracle (ORCL) and SAP (SAP). Customer Relationship Management (CRM) is one of the fastest growing sectors of enterprise applications today, with annual sales over $23 billion in 2014. The industry is top-heavy though, with the top 10 vendors accounting for over 60% of the market, according to research firm Gartner. Gartner estimates that Salesforce controls 18.4% of the market while SAP has 12.1%, Oracle has 9.1%, Microsoft has 6.2% and IBM has 3.8%.
SalesForce was used by 35% of respondents to Software Advice's survey while the next highest usage rate was for Microsoft at 10%. Oracle and SAP were tied for seventh with 3% of the vote.
"It is pretty amazing to have an $8 billion company put up 27% revenue growth -- this is a gigantic enterprise. It is downright confounding for a company that was often thought to have chimerical earnings power to generate 38% growth in operating cash flow, to $460 million -- that's cash on the barrelhead. It's a very rare thing to hear about a nine-figure deal in technology -- Salesforce had two of them. There's also $11 billion in deferred revenue, meaning that the next quarter is going to be strong, too," Cramer said.
The cat is out of the bag now and Salesforce probably won't be taking anyone by surprise going forward.