ARC-801 mock - Salesforce Design and Implement B2B Multi-Cloud Solutions Updated: 2024

For much of the last decade, Salesforce (CRM 0.21%) co-founder and CEO Marc Benioff has been talking about becoming "one of the largest enterprise software companies in the world." Mission success. Salesforce is No. 3, behind much-older industry titans Microsoft and Oracle.

Salesforce's rapid growth, spurred on by a seemingly endless string of acquisitions, served its purpose for the time. The cloud software movement that Salesforce pioneered was white-hot in the 2010s. A never-ending line of start-ups fueled by venture capital money struck out to lay claim to the growing industry, and Salesforce purchased its fair share of them to bolster its status as a platform and to stave off future competition.

But times change. The software boom is over for now, and investors are demanding better profit margins rather than all-out growth. Salesforce has successfully made the pivot. After rallying 90% through the first 11 months of 2023, is the stock still a buy for 2024?

Salesforce is executing on its plan of growth and profitability

For fiscal 2024 (the 12-month period ending in January 2024), Salesforce is on track to reach about $34.8 billion in revenue. That's just an 11% year-over-year increase, far lower than the 20%-plus pace longtime shareholders have been accustomed to.

Growth is growth, though, and it's not surprising to see Salesforce's exponential rise taper off now that it's of such immense size. After all, 2023 has marked a general cooldown for the cloud software market overall, so a titan like Salesforce certainly isn't going to be immune. Time will tell if Benioff and company can reaccelerate their top-line trajectory next year (fiscal 2025, which corresponds to calendar year 2024).

Data by YCharts.

But of far more importance at this point is better operational excellence. Software is a high-profit business, but especially in the last couple of years, the long run of free cash flow generation took a breather. Net income, based on generally accepted accounting principles (GAAP), also faltered. That was largely due to all those acquisitions, culminating in the big purchase of Slack in 2021 -- on record as one of the largest software deals ever.

But Salesforce has successfully reignited free cash flow growth, and GAAP profitability is making a big comeback too. In Q3, operating margin came in at 17%, well ahead of management's guidance and a massive improvement from just under 6% the same period last year.

Data by YCharts.

A new page has been turned

There is still work to do at Salesforce in this new era of operational efficiency. One of the primary discrepancies between GAAP profits and free cash flow, for example, is employee stock-based compensation (SBC). SBC was $2.11 billion through the first nine months of this year, down a bit from the $2.47 billion the same period last year.

However, at just over 8% of total revenue, SBC is still elevated for a company of this size. If Salesforce wants to really ratchet up its profit margins, this metric will need to come down further.

Nevertheless, Benioff and the top team say they are committed to offsetting this shareholder dilution from SBC. Stock repurchases to date were $5.9 billion, more than offsetting SBC, and there's still another $10 billion left under the current buyback authorization.

It's nevertheless a good start for the more "shareholder-friendly" Salesforce as it flips from a young growth business to a mature tech giant. If the current trend continues, 2024 could be another big year of more moderate revenue growth but dramatic profit expansion.

The stock currently trades for 28 times trailing-12-month free cash flow. That looks like a reasonable price to me, especially assuming profit growth can average a low-to mid-teens percentage growth rate in the coming years. Even if the cloud software market continues at a similar pace as it has these past two years during economic turmoil, Salesforce looks like a top long-term buy.

Nicholas Rossolillo and his clients have positions in Salesforce. The Motley Fool has positions in and recommends Microsoft, Oracle, and Salesforce. The Motley Fool has a disclosure policy.

Adobe (ADBE 0.01%) and Salesforce (CRM 0.21%) are two of the world's largest cloud software companies. Adobe transformed its desktop-based media software into cloud-based services over the past decade, while Salesforce owns the world's leading cloud-based customer relationship management (CRM) platform. Both companies also provide additional sales, marketing, e-commerce, and analytics services.

Adobe and Salesforce both reached their all-time highs during the apex of the growth stock rally in November 2021. But both stocks have pulled back over the following two years as rising interest rates drove investors toward more conservative investments. Should you invest in either of these cloud giants before the market heats up again?

Adobe faces slower growth and regulatory challenges

Adobe's revenue grew at a compound annual growth rate (CAGR) of 19% from fiscal 2017 to fiscal 2022 (which ended on Dec. 2, 2022). But in fiscal 2023, its revenue only rose 10%, and it expects just 10%-11% growth in fiscal 2024.

Adobe's Digital Media segment, which accounted for 73% of its revenue in fiscal 2023, is still growing at a steady rate as it locks media professionals into its sticky subscriptions. But its enterprise-facing Digital Experience segment, which accounted for 25% of its revenue, faced tougher macro headwinds over the past year. Currency headwinds also reduced its reported revenue growth by three percentage points for the full year.

Adobe's slower growth disappointed investors, who had expected its new generative AI tools -- which can be used to create AI images, photos, and 3D models, as well as accelerate other enterprise tasks -- to boost its near-term sales.

Adobe's operating margins are still rising and its adjusted EPS grew 17% in fiscal 2023, but it expects just 10%-12% growth in fiscal 2024. It also recently warned it could incur "significant monetary costs" to settle a Federal Trade Commission (FTC) probe into the cancellation policies for its subscriptions, and its $20 billion acquisition of Figma remains in limbo due to antitrust challenges. Adobe's EPS outlook for fiscal 2024 doesn't account for either of those unpredictable factors.

That combination of slowing growth and regulatory headwinds spooked the bulls, who had rushed back to Adobe amid the buying frenzy in AI stocks. Even after its post-earnings decline, it still doesn't look cheap at 33 times forward earnings.

Salesforce is prioritizing its profits over its sales growth

Salesforce's revenue rose at a CAGR of 26% from fiscal 2017 to fiscal 2022 (which ended on Jan. 31, 2022). But its revenue only increased 18% in fiscal 2023, and it expects just 11% growth in fiscal 2024.

Salesforce faces many of the same challenges as Adobe. The macro headwinds made it difficult to lock bigger customers into longer contracts, while the currency headwinds reduced its reported revenue by four percentage points in fiscal 2023.

Salesforce has also been expanding its AI ecosystem to analyze its customer data more efficiently and accelerate certain tasks. But those new services aren't moving the needle on their own yet -- and Salesforce still faces stiff competition from Microsoft, Oracle, and other tech giants in the CRM market.

Over the past year, the stabilizing growth of Salesforce's platform and other business (which houses Lightning and Slack) and the accelerating growth of its data cloud (which includes Mulesoft and Tableau) offset the slower growth of its sales cloud, service cloud, and marketing & commerce cloud businesses. But those three weaker businesses -- which together accounted for 65% of its revenue in the first nine months of fiscal 2024 -- could recover as the macro environment improves.

Activist investors besieged Salesforce throughout the first half of calendar 2023, but they backed off as it significantly boosted its operating margins and earnings by laying off 10% of its workforce and reining in its spending. Its adjusted EPS only rose 10% in fiscal 2023, but it expects an acceleration to 56% growth in fiscal 2024.

Salesforce's stock looks cheap at 29 times next year's earnings, but the bears warn that its prioritization of profitability over sales growth could narrow its competitive moat in the crowded cloud software market.

The better buy: Salesforce

I'm not a big fan of either stock right now because the flaws are easy to spot. But if I had to choose one over the other, I'd pick Salesforce. Its profit growth is accelerating, its stock is cheaper, and it doesn't face any regulatory challenges.

Leo Sun has positions in Adobe. The Motley Fool has positions in and recommends Adobe, Microsoft, Oracle, and Salesforce. The Motley Fool recommends the following options: long January 2024 $420 calls on Adobe and short January 2024 $430 calls on Adobe. The Motley Fool has a disclosure policy.

Google, AWS, Deloitte, CGI and KPMG were among the standout companies at Dreamforce 2023.

Tech giants, solution providers and managed services providers were among the standout exhibitors at this year’s Dreamforce, the annual Salesforce event.

San Francisco-based Salesforce – a vendor for enterprise applications, customer relationship management (CRM) software and more recently generative artificial intelligence (GenAI) – advertised this year’s Dreamforce as the premiere event for AI.

And sure enough, many of the biggest announcements at Dreamforce 2023 – held in Salesforce’s hometown – centered around the emerging technology, as did Salesforce CEO and co-founder Marc Benioff’s keynote address.

[RELATED: Salesforce Dreamforce 2023: 8 Biggest Announcements]

Salesforce Dreamforce 2023

“We want to build the trusted AI platform for customer companies so that everyone is an Einstein and more productive,” Benioff said this week. “We think that trust is the highest priority here. We want to turn it over to you – but only with trust. We want to make sure it’s integrated. We want to make sure it’s intelligent. We want to make sure it’s automated. We want to make sure it’s low code and no code. We want to make sure it’s open. … This is our life’s work. This is what we’ve been doing for 25 years.”

Salesforce has about 6,000 partners, according to the vendor.

Among the standout exhibitors at Dreamforce 2023:

*Google

*Amazon Web Services (AWS)

*Deloitte

*CGI

*KPMG

Read on for why these exhibitors had attendants talking.

Google

During Dreamforce 2023, Salesforce and Google revealed that they expanded their partnership to further integrate their products.

Salesforce became the first partner to integrate with Mountain View, Calif.-based Google’s Duet AI extensions framework. And Google Workspace is the first extensibility partner for Salesforce Einstein Copilot, according to Salesforce.

Users can bring in context from Salesforce and Google Calendar, Docs, Meet, Gmail and other productivity applications

Google Workspace users gained the ability to generate content in that platform and update records and trigger workflows in Salesforce.

Joint users can also bring PaLM 2 and other Google-hosted LLMs from Vertex AI to Salesforce’s Einstein Copilot Studio to build GenAI products.

AWS

Amazon Web Services’ presence at Dreamforce this year was amplified by an announcement that the cloud giant and Salesforce will pilot a series of integrations next year that promise to enable sharing of data lakes and large language models (LLMs) between the two vendors.

Users of Seattle-based Amazon’s Redshift, EMR, Athena, Bedrock and SageMaker can leverage foundation models within Salesforce with security, according to Salesforce. The process has zero extract, transform and load (ETL) processes, meaning no copying and moving data.

An existing integration between Service Cloud Voice with Amazon Connect allows users the ability to launch contact center services with Salesforce’s agent desktop with Amazon Comprehend, Transcribe and other services to improve agent productivity, according to Salesforce.

AWS has about 100,000 channel partners worldwide, according to CRN’s 2023 Channel Chiefs.

IBM

Ahead of Dreamforce 2023, IBM and Salesforce revealed a new collaboration around AI adoption for customer relationship management (CRM) tools.

As part of the collaboration, IBM Consulting professionals will guide clients through Salesforce AI adoption and deployment, according to IBM. These professionals can also combine Salesforce AI tools with IBM’s own Watsonx for more insights.

IBM Consulting’s Center of Excellence for Generative AI features more than 1,000 professionals with experience in enterprise-grade Salesforce, IBM and other vendor technology.

IBM’s AI and Automation practice has 21,000 professionals, according to the vendor.

And the IBM Data Classifier application can help reduce data mapping processes when using Salesforce AI, according to the Armonk, N.Y.-based vendor.

IBM has about 55,000 channel partners worldwide, 12,000 of them in North America, according to 2023 Channel Chiefs.

Snowflake

Although Snowflake recently brought on former Salesforce executive Tyler Prince as its channel chief, the two vendors continue to deepen their partnership for joint users.

Ahead of Dreamforce 2023, the companies announced general availability of Bring Your Own Lake (BYOL) Data Sharing with Snowflake Data Cloud from Salesforce Data Cloud, bridging data within both vendors’ platforms for more insights around market trends, customer behavior, operations and more, according to IBM.

Salesforce and Bozeman, Mont.-based Snowflake plan on launching BYOL Data Federation “in the coming months” for further bidirectional data sharing, according to Salesforce.

OpenText

OpenText’s Apps for Salesforce offering promises users the ability to connect Salesforce clouds to the former’s ware for a variety of enhanced capabilities.

The Canada-based technology vendor conglomerate’s Apps for Salesforce promises users the ability to generate and retrieve relevant communications for improved customer experiences and availability of critical documentation, brand templates and digital assets, according to OpenText.

OpenText has about 20,000 channel partners worldwide, according to CRN’s 2023 Channel Chiefs.

Veeam

In the lead up to Dreamforce 2023, Veeam unveiled the second version of its Backup for Salesforce offering.

The Columbus, Ohio-based data security vendor’s offering allows administrators to limit single sign-on (SSO) authentication to specific Salesforce domains and support multi-factor authentication (MFA).

A new restore wizard allows sandbox seeding users to specific sources and target Salesforce organizations, according to Veeam.

Veeam has about 37,000 channel partners worldwide, according to CRN’s 2023 Channel Chiefs.

Persistent Systems

Persistent Systems – a Salesforce partner and member of CRN’s 2023 MSP 500 – was on site at Dreamforce 2023.

The MSP’s Salesforce services include end-to-end marketing, sales automation, omni-channel customer service and integration of Salesforce subsidiary MuleSoft, according to Persistent, which has offices in California, New Jersey, North Carolina, Texas, Georgia and worldwide.

Over the companies’ 18-year partnership, Persistent has landed more than 6,800 certifications, 150,000 badges on Salesforce learning platform Trailhead and more than 1,400 joint projects, according to the MSP.

Cognizant

Cognizant has a variety of industry-based Salesforce services for clients, including ones for insurance, retail, media and banking.

The solution provider’s insurance offerings include InsurElevate for managing end-to-end policy lifecycles. For retailers, Cognizant offers OmniServe Next for introducing GenAI. SubcriberX promises the ability to grow subscriber bases and increase revenue and customer loyalty.

And Loan Origination Collaboration helps banks settle loans faster, according to the solution provider.

The Teaneck, N.J.-based company – No. 6 on CRN’s 2023 Solution Provider 500 – also has a codeless compliant forms offering available on Salesforce’s AppExchange marketplace.

DXC Technology

Another solution provider heavyweight exhibiting at Dreamforce was DXC Technology.

Ashburn, Va.-based DXC – No. 10 on CRN’s 2023 Solution Provider 500 – has completed more than 500 Salesforce projects and has 10 related global solution centers, according to the solution provider.

Some of DXC’s Salesforce capabilities include expanding digital service centers, improving e-commerce functions, building Einstein chatbots and integrating industry platforms, according to the solution provider.

KPMG

KPMG had representatives at Dreamforce 2023 to discuss the Big Four accounting firm and professional services giant’s partnership with Salesforce.

Representatives of the Netherlands-based firm participated in several speaking sessions, discussing its work modernizing Cisco Meraki’s Salesforce ecosystem and implementing Salesforce at the Department of Defense.

Repeatable KPMG Salesforce services include application security and controls, sustainability reporting, modern enterprise integration and customer due diligence (CDD), according to the firm.

Deloitte

Deloitte Digital revealed a series of new integrations with Salesforce, including bringing Einstein AI to its DigitalMIX platform and new services for biopharmaceutical (BioPharma) organizations.

DigitalMIX gained new abilities for automation, personalization, and analytics across sales, service, marketing and the back-office, according to the global systems integrator (GSI).

Users can leverage more predictive analytics, GenAI and visualizations for productivity, revenue growth and customer relationships, according to Deloitte.

DigitalMIX offers scalable, pre-configured services for multi-cloud finance implementations. The offering already works with Salesforce Sales Cloud, Service Cloud, Marketing Cloud and other products.

Although the details were scarce on Deloitte Digital and Salesforce’s BioPharma alliance, a statement from Deloitte promised to “empower BioPharma firms to bring innovative therapies to patients faster” and “the next generation of innovations that help enable the rapid scientific and technological progress of this sector.”

They also promised “new engagement models for healthcare professionals and patients across the entire value chain from clinical to commercial,” according to Deloitte.

CGI

CGI has been a Salesforce partner since 2010, developing expertise across industries and offering strategy, consulting, design, implementation, integration, managed services and other offerings.

The Canada-based company – No. 12 on CRN’s 2023 Solution Provider 500 – has 10 Salesforce centers of excellence worldwide, more than 300 Salesforce customers and more than 400 Salesforce certified professionals, according to CGI.

Among CGI-s Salesforce-related offerings is a collections service for state and local government agencies, a community portal for field service and asset intelligence and a cloud accelerator for manufacturers, according to the solution provider.

Virtusa

Virtusa boasts a eight-plus year partnership with Salesforce with more than 1,800 certification and more than 710 certified professionals.

The Southborough, Mass.-based company – No. 39 on CRN’s 2023 Solution Provider 500 – has Salesforce-based offerings across life sciences, health care, banking, telecommunications and other industries, according to Virtusa.

Specific Virtusa offerings revolve around Salesforce Einstein GPT, Salesforce managed services, transforming contact centers and simplifying appeals and grievances processing, according to the solution provider. A Virtusa vice president even presented at Dreamforce 2023 about a sales-related project at British telecommunication company BT.

Capgemini

Capgemini introduced a Generative AI for CX Foundry offering, built from a Salesforce collaboration, before Dreamforce 2023.

With this new offering, the France-based company – No. 3 on CRN’s 2023 Solution Provider 500 – promises a way to personalize customer experiences and use data to automate customized content creation while abiding by security and ethics standards, according to Capgemini.

The offering should help clients use Salesforce Einstein AI technology with existing IT infrastructure, data models and business processes, according to Capgemini. Joint Capgemini and Salesforce customers include Heathrow Airport.

TCS

One of Tata Consultancy Services’s biggest Salesforce-related offerings involves its Crystallus set of pre-configured industry solutions and composable business applications.

The offering from the India-based company – No. 2 on CRN’s 2023 Solution Provider 500 – can help customers adopt more cloud services and improve business outcomes, according to TCS.

TCS’ Salesforce practice includes advisory services around cloud and content strategy, adopting development security operations (DevSecOps) and blueprinting, according to the solution provider.

The solution provider can also implement and support multiple Salesforce products, including Data Cloud and MuleSoft. TCS has more than 7,500 Salesforce-certified professionals, according to the company.