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May The Salesforce Be With You

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What's going on?

It’s no Jedi mind trick. It’s another better-than-expected quarter from the American software giant valued at $112 billion, Salesforce.

What does this mean?

Revenues were 27% higher than the same time last year, and profit shot up too, exceeding forecasts. Salesforce’s cloud segments (which make up most of its sales) continued their ascent. Demand for cloud computing services has also been propelling growth at rivals Amazon and Microsoft (it seems a strong wind lifts all clouds). And the company’s acquisition of cloud computing company MuleSoft in March should help it shoot toward its sales target of $20 billion sooner than it previously thought (last year’s sales were around $10 billion).

Why should I care?

For markets: A Salesforce encore but leaves investors wanting more.

Salesforce has built a bit of a reputation for itself – investors generally expect it to exceed the targets it sets out, as it’s made a habit of doing in the past. But in doing so again, perhaps the company’s made a rod for its own back. Despite raising its expectations for its sales and profit for the year as a whole, Salesforce’s forecast for its next quarter’s profit is below what investors had hoped, which may explain the stock’s 2% fall on Wednesday.

The bigger picture: Silicon Valley tech firms are having a moment in the sun.

On Tuesday, Hewlett Packard Enterprise reported better sales and profit than investors expected for the last quarter, helping its stock rise by 4% on Wednesday. HP’s been focused on trimming the fat – cutting 10% of its staff in order to lower costs – and trying to do more business in areas like “networks” – things like security for mobile and internet-of-things devices (similarly to social networks, they generally require fewer upkeep costs once installed, compared to selling physical machinery like servers) which are higher margin – i.e. sales in that segment translate to higher profit.

Originally posted as part of the Finimize daily email.

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