As has often happened across Salesforce’s meteoric 23-year ascent to the top ranks of the software industry, co-founder Marc Benioff once again finds himself and his company in uncharted territory.
Except this time, rather than defying the laws of gravity and physics as it has so often done, Salesforce has succumbed to them as its quarterly growth rate plummeted to its lowest percentage— by far — in at least five years.
Now, this extraordinary phenomenon needs to be put into context because in every other industry on Earth, the fiscal-Q3 numbers that Salesforce posted — 14% growth to $7.84 billion — would be astonishing. But in the Cloud Wars, those numbers raise some very serious questions about how Benioff and Salesforce will regain their full momentum in a troubled economic environment and against some vicious competition. And I’ll get to those questions in just a moment.
But first I want to share a rather long list of numbers because, in aggregate, they illuminate two separate but related issues:
- the sustained and extraordinary performance of Salesforce over the past five years (and no doubt across the preceding 18 years as well); and
- the stark nature of the company’s fiscal-Q3 performance relative to that stellar five-year track record.
So here are Salesforce’s growth rates for each of the past 20 quarters, and I’ve also included the revenue figures for each quarter to give you additional context on the magnitude of the revenue bases on which those impressive growth numbers were generated. Below those numbers, I’ll offer up the five most-urgent questions that I feel should be asked in light of this unprecedented quarterly performance.
| Period | Growth Rate | Revenue |
| Fiscal 2023 (Feb1, 2022, through Jan 31, 2023) | ||
| Q3 | 14% | $7.84 billion |
| Q2 | 22% | $7.72 billion |
| Q1 | 24% | $7.41 billion |
| Fiscal 2022 (Feb. 1, 2021, through Jan. 31, 2022) | ||
| Q4 | 26% | $7.33 billion |
| Q3 | 27% | $6.86 billion |
| Q2 | 23% | $6.34 billion |
| Q1 | 23% | $5.96 billion |
| Fiscal 2021 (Feb. 1, 2020, through Jan. 31, 2021) | ||
| Q4 | 20% | $5.82 billion |
| Q3 | 20% | $5.42 billion |
| Q2 | 29% | $5.15 billion (onset of COVID) |
| Q1 | 30% | $4.87 billion |
| Fiscal 2020 (Feb. 1, 2019, through Jan. 31, 2020) | ||
| Q4 | 35% | $4.85 billion |
| Q3 | 33% | $4.5 billion |
| Q2 | 22% | $4.0 billion |
| Q1 | 24% | $3.74 billion |
| Fiscal 2019 (Feb. 1, 2018, through Jan. 31, 2019) | ||
| Q4 | 26% | $3.6 billion |
| Q3 | 26% | $3.39 billion |
| Q2 | 27% | $3.28 billion |
| Q1 | 25% | $3.01 billion |
| Fiscal 2018 (Feb. 1, 2017, through Jan. 31, 2018) | ||
| Q4 | 24% | $2.85 billion |
Again, while I realize I’ve thrown a lot of numbers at you, it’s a remarkable record of consistent high-level growth across a five-year period with a relentless ability to grow at 20% or higher.
And as I offer my sense of some big questions Benioff and his team need to wrestle with, I don’t mean to imply that the company’s “in trouble” or anything of that nature. In the Cloud Wars, we’ve become so accustomed to stunning levels of growth that Salesforce’s latest quarterly numbers —growth of 14% to $7.84 billion — would stand out in every other industry as a wild exception of great success, but here are seen as a trigger for deep self-examination and inevitable major changes.
5 Big Questions I Think Salesforce Must Address
1. Why was Salesforce rocked more violently by the current economic uncertainty than competitors Oracle and SAP, and also SaaS (software-as-a-service) buddy Workday? Benioff spoke at great length during the earnings call about the uncertainty customers are facing and the greater scrutiny they’re placing on tech spending (and, of course, all spending). But he offered no insights into why Salesforce’s growth rate was slashed almost in half from 27% in Q3 a year ago to 14% while the other three big enterprise-apps SaaS vendors saw their comparable numbers go up (Oracle and SAP) or remain level (Workday). With its Cerner acquisition, Oracle SaaS revenue was up 43%, and CEO Safra Catz said that even without Cerner, it would come in at about 30% through the middle of 2023. SAP’s apps business is growing in the mid-30’s, and Workday’s subscription-revenue growth rate remained around 22.3%. So what is making Salesforce the outlier?
2. Can Marc Benioff handle the co-CEO thing? When current co-CEO Bret Taylor steps down at the end of next month, he will have been in that role 15 months. Yes, he was at the company for six years, but as co-CEO he lasted only 15 months. Those durations are eerily similar to the tenure of former co-CEO Keith Block, who was at the company for about seven years, capped by his 18-month stint as Benioff’s co-CEO that ended in February 2020. No reason was given for Block’s departure, although Benioff gushed about how wonderful Block is/was and how much he would be missed. With Taylor, the story is that he wants to return to his entrepreneurial roots. Okay, perhaps that’s not surprising for a serial entrepreneur of Taylor’s stature and success — but just over a year ago when he took the job, did he believe he’d never want to do startups again? Or did Benioff believe he could charm Taylor into changing his DNA? Will there be another co-CEO? And if so, can that person last more than 18 months?
3. How is it possible that in a business world obsessed with data, Tableau’s growth rate crashes to 8%? A couple of years ago, Benioff said Tableau was not only the greatest acquisition ever made by Salesforce, but was the greatest acquisition in the history of the entire tech industry. So how the heck did Tableau revenue grow just 8% last quarter, particularly in a business world utterly obsessed with data? And at a time when Salesforce just introduced its own data cloud, called Genie?
4. Why did Salesforce decline to offer guidance for the full year — is the picture really that murky? While Benioff loves to describe the levels of precision and insight his company has achieved, Salesforce CFO Amy Weaver said on the Nov. 30 earnings call that the uncertainty in the market made it “premature” for the company to offer guidance for the coming year, and that it would do so on its fiscal-Q4 earnings call in late February.
5. How will Salesforce get back on its long-time trajectory of 20%+ growth? Or perhaps the question should be this: Are Salesforce’s days of 20%+ growth behind it? Benioff seemed more interested in talking about the company’s profit levels than about a return to its traditional growth levels, and in way, that’s fine — nothing wrong with higher profits. But until Salesforce can address the questions around what has been its truly unique differentiator — its relentless ability to grow at least 20% and often 25% or more quarter after quarter — people are going to look at Marc Benioff and his company in a very different way.
Because, as the old saying goes, you are what your record says you are.
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