Good day, ladies and gentlemen, and thank you for standing by. Welcome to the CRM Q3 Fiscal Year 2019 Earnings Conference Call. At this time, all participants are in a listen only mode. Following management's prepared remarks, we will host a question and answer session and instructions will be given at that time. As a reminder, this conference call is being recorded for replay purposes.
It is now my pleasure to hand the conference over to Mr. John Cummings, Senior Vice President of Investor Relations. Sir, you may begin.
Thanks so much, Brian. Good afternoon, everyone, and thanks for joining us for our fiscal Q3 2019 results conference call. Our results press release, SEC filings and a replay of today's call can be found on our IR website at www.salesforce.com/investor. With me on the call today is Keith Block, Co CEO Mark Benioff, Chairman and Co CEO Mark Hawkins, President and CFO and Bret Taylor, President and Chief Product Officer. As a reminder, our commentary today will primarily be in non GAAP terms.
Reconciliations between
our GAAP and non GAAP results and guidance
can be found in earnings press release. Some of our comments today may contain forward looking statements, which are subject to risks, uncertainties and assumptions. Should any of these materialize or should our assumptions prove to be incorrect, Agile Company results could differ materially from these forward looking statements. A description of these risks, uncertainties and assumptions and other factors that could affect our financial results are included in our SEC filings, including our most recent report on Form 10 ks.
With that, let me hand
the call over to you, Keith.
Hey, thank you, John, and thanks, everyone, for joining us today. As you can see As you can see from our results, we had another great quarter as we continue to deliver strong growth, customer success and execution at scale. Revenue in Q3 was up 20 6% and given the strength of the quarter and our outlook for Q4, we are raising our FY 2019 full year revenue guidance to $13,240,000,000 at the high end of the range. This represents 26% growth this year. Obviously, we are very, very proud of the quarter and momentum in our business and our leadership position in the market.
We are also initiating revenue guidance for FY 'twenty at $1,000,000,000 at the high end of the range representing 21% growth for the year and demonstrating the incredible demand for the solutions only sales force can deliver. We are clearly executing on our vision of transformation and success for our customers and we are doing it at scale. Every company in the world has a mandate to digitally transform its business. We continue to see this in Q3 with strong performances across every industry, every market segment and every geography. We grew 25% in the Americas, 26% in APAC and 31% in EMEA in constant currency.
Now since Dreamforce at the end of September, I've traveled around the world meeting with more than 100 CEOs and world leaders. The conversation is consistent everywhere I go. It's about digital transformation. It's about leveraging our technology. It's about our culture and it's about our values.
This C level engagement is translating into more strategic relationships than ever. In fact, in Q3, the number of deals generating more than $1,000,000 was up 46% over last year and the number of $20,000,000 plus relationships we have continues to grow significantly. In fact, in the quarter, we renewed and expanded a 9 figure relationship with 1 of the largest financial services institutions in the world. We are very, very excited about this. And as you know, an overwhelming majority of our revenue is multi cloud.
Customers like DuPont, Citi, Uber, many others, they're all driving more meaningful relationships with their customers across sales, service, marketing, commerce, integration and more. I was recently in Australia where I met with dozens of government officials and CEOs across several industries. Many are being challenged by Now we Now we had a great quarter in EMEA where we strengthened our relationships with Deutsche Telecom, ENGIE, Dyson and Koning. In APAC, we expanded with Telstra and Bajaj Vinserv and formed a new relationship with MLC Life Insurance. In Japan, we expanded with heavy industrial manufacturer IHI as one of the world's leading auto manufacturers.
Our industry strategy, which is all about speaking the language of the customer, continues to drive exceptional growth. Our strong momentum with Financial Services Cloud continued in Q3. And as I mentioned before, one of the largest financial services institutions in the world selected Financial Services Cloud as well as Einstein. Mutual America Life Insurance also selected Financial Services Cloud and they are leveraging Salesforce Einstein to improve their go to market strategy and customer engagement. Heading on Federal Credit Union with nearly 2,000,000 members is also going all in with Financial Services Cloud as well as Community Cloud, Einstein and MuleSoft to deliver a best in class member experience.
And the Salesforce platform now powers mission critical applications across the Department of Veterans Affairs, while Service Cloud helps ensure veterans can reach a live support agent 24 hours a day, 3 65 days a year, very, very important for those folks. We also expanded with the branch of the United States Armed Forces to transform how they engage with the service members from recruitment to retirement. And with Health Cloud, we formed a new relationship with WorkSafe Victoria in Australia and we expanded our existing relationship with Alcon, one of the world's leading eye care and medical device companies. Now partners, which are so critical to our growth, they continue to expand our ecosystem which extends the power of our core offerings. At Dreamforce, we added Apple to our roster of strategic partners which we're very excited about.
That roster includes Amazon, Google, IBM and others. And this quarter, our SI partners were engaged in 64% of our new business globally and continue to invest in their sales force practices. Global partner certifications are up 26 percent year over year. That's the 19th consecutive quarter that our partner certifications have grown by double digits. Finally, we continue to execute again and again with our proven integration model and as a result, we're already seeing great returns from our acquisitions of MuleSoft and Datorama and CloudCraze.
And speaking of MuleSoft, integration has become a strategic imperative for all of our customers. It has captured the attention of C level executives in virtually every conversation I have. And in the quarter, companies like Avold, Delays, WeWork, Michael Stores and it continues. Just love MuleSoft because MuleSoft is able to unlock data from legacy systems and accelerate their digital transformations. In closing, we are thrilled with our results and our strong momentum heading into Q4 and FY 2020.
It's been an outstanding year to date and we are well on our way to achieving our goal of $21,000,000,000 to $23,000,000,000 in revenue in FY 'twenty two faster than any enterprise software company in history. I want to thank our customers, our partners and employees for their trust and continued support. I also want to take a moment to thank the firefighters and first responders who have courageously battled the wildfires here in California. Our thoughts remain with them and all of those who have been affected by these terrible events. With that, I will turn the call over to Mark.
All right. Well, thank you so much, Keith. And before I start, I do want to just come back to that and thank all of the first responders and everyone who's worked so hard over the last 2 weeks. We've had a terrible tragedy here in Northern California and also 1 in Southern California. And certainly during the holidays, 14,000 families have lost their home, 500 businesses.
Half of all first responders lost their home in the fires and it's been a terrible disaster here. Obviously, we had a terrible fire last year. This one is even worse. It's our worst ever in Northern California. And all of our hearts are with the victims and their families.
And also, all of our gratitude is with first responders. We had a city here filled with smoke for a couple of weeks and that smoke just reminded us how connected we are not only to each other here in San Francisco, but all the way up to Butte County. And our hearts remain with them during the season. And I really want to thank not only our employees, but also customers. Many of them came to our lobbies here where we supplies up and brought them up to Butte County and distributed gift cards.
Many of our customers to our retailers helped us procure gift cards for 1st responders as well as for the families in Butte County. I want to thank them and we're going to continue to work on that. It is still on our mind and we're also giving $2,000,000 initially to these relief efforts. And all of us at Salesforce are going to continue to stand with our neighbors and communities across California as we're rebuilding. Thank you for letting me just talk about that for just a moment because it's been something that we've all gone through here over the last 2 weeks, several weeks.
Okay. Now, with respect to the numbers, Keith said it, this was absolutely fabulous Q3. It was incredible. Obviously, we've given guidance for an incredible Q4 coming, and I'm hoping that Keith is going to improve on that, even though the Q4 guidance is incredible. And here we are at $16,000,000,000 for next year and only 2 years from our goal of $22,000,000,000 to $23,000,000,000 which is amazing that in fiscal year 2022 we have this vision.
So thank you to our team and our Ohana for delivering these incredible results. It's just amazing and an incredible moment in history. We are all in this mist here and I just was talking to Jim Cramer and it's like, what is happening? And so, this is all about the 4th industrial revolution. This is about the cloud.
It's about artificial intelligence, machine learning, deep learning. There's so many technologies that are happening. I read this morning in the newspaper about CRISPR being used to genetic editing of twins in China. We are in a lot of unchartered territory
here
and we're going to continue to see incredible expansion. But when it gets right down to digital And CRM has never been more strategic. You can see that in the growth rates for the CRM marketplaces. It remains the fastest growing market segment, enterprise software. That's a big change from when Keith and I started in the enterprise software industry.
Both started in 1986 and it was all about other types of technologies that have been downplayed. Now, it's all about the customer. It's about CRM. This is a big and exciting market. We're obviously the largest player.
We have these incredible growth rates that we're putting up. But when we look at other companies in the CRM marketplace, a lot of companies are doing very well because this is what it's all about. It's all about the customer. And Salesforce remains this global CRM leader. We're the number one CRM.
We continue to take share and outpace the market. You can see that in our results as we're moving to $16,000,000,000 This is because we're the only company that is dedicated 100% to CRM at this size and scale. And we're the only company with a complete customer success platform for both these B2B customers and their B2C companies as well. For those of you who joined us at Dreamforce, I always look at that as the ultimate manifestation of our company and how we're doing. You saw the huge turnout, especially compared to some of our competitors.
I'm not going to name any names because they're very sensitive. They get upset. But some of our competitors also had conferences recently and have big hits turn out like this, 171,000 registered attendees, 10,000,000 who watched us online, largest Dreamforce ever. Probably everyone on the call was at Dreamforce. It was incredible.
And we saw these amazing companies where Marriott and Bernardo Guccinelli was here from Italy and Unilever was here from the United Kingdom and everyone connecting with their customers in a whole new way. We also saw my friend on the right here did an incredible new product. Fred Taylor launched his Customer 360, customer is blown away, connecting all of our clouds together, giving our customers a single 360 degree view of their customers across every touchpoint, across sales, across service, marketing, commerce. But really thinking now, especially with MuleSoft, how do we give those customers that 360 degree view that they so badly want? And that's why this is one of the biggest downs we've ever made and I hope Brett will talk about it later on the call.
And of course, you can see the acceleration in our business and also in our positioning and our relationship with our customers in MuleSoft, the number one integration cloud, giving customers extraordinary power of integration, bringing together vast amounts of data across all kinds of systems in this incredible API architecture. I always love this company and I love it more now as part of Salesforce. They're right here with us now in Salesforce Tower. Greg and his team just an incredible job and we saw that not just at Dreamforce but through the whole quarter. And I think both companies are just hugely surprised at how well it's come together, but also their execution is dynamite.
And then you also saw the release, again, Brad came up with this with Parker, Einstein Voice, amazing. And you saw these amazing demonstrations of voice, not just interactive voice response, but now Salesforce can actually parse the data and actually insert it correctly in the customer database automatically. So anyone can talk to Salesforce, makes every employee customer more productive, amazing. And Einstein, talking to Siri, Einstein and Siri are now friends. Hopefully, they're going to become best friends because we had Apple for the first time, strategic relationship, something we've always wanted.
At Dreamforce, amazing to have this great relationship with Tim Cook, probably best executive in our whole industry. Thank you, Tim, for your leadership and what you've done, the relationship with Salesforce. We're very grateful to you. And as we roll out these new mobile apps, our customers are expecting more innovation to come. Now, you also saw that we're strengthening our relationships with amazing companies in the cloud world, including Amazon and Google and IBM delivering these incredible innovations.
And our customers are just loving what the amount of innovation that's happening in our industry, especially as the cloud becomes mainstream and at Dreamforce, we're thrilled to announce a new strategic partnership. Again, just expanding that capability and giving us that capability to have it not only with Amazon and Google, but Apple as well and other companies. Okay. Let's talk about Einstein for a second. I told you Einstein was delivering 3,000,000,000 productions and insights every day in the last quarter.
Well, now a few months later, we are doing 4,000,000,000 Einstein predictions every single day, exceeding our expectation. The transformation of all of our products to artificial intelligence, all of our products getting smarter, all of our products having Einstein built in, that Einstein is at the heart of the customer success platform, making it more powerful and more capable every day. You look at the many layers of our customer success platform. The center is the customer. Then, of course, everything is going in and out of Einstein with Einstein making the customer smarter, being our partner every day.
I know I use that. That's incredibly important to me, surrounded by this full range of capabilities, whether it's sales or service or marketing or commerce or a platform or integration or a community or enablement or engagement. All levels of the customer success platform has been made better by Einstein and then wrapped by this amazing trailblazer community. So awesome. Now, we really saw it this weekend, I'll tell you, during Black Friday and Cyber Monday, of course, our customers have deployed this customer success platform.
So, you're like wondering what's going on. I just got this amazing report. I can't talk about it because it's a public company and we're working very closely with who had this massive success over the weekend and they're in the retail industry. But I look at all these companies and we're powering more than 20,000,000 orders on the customer success platform, double digit growth, amazing. But one thing that really stood out for us was 50% of the orders are placed on the phone.
Wow! Mobile traffic to retail sites reaching 67%. So obviously, that's a huge transformation that we've gone through and our customers, especially retail customers, are going through that. I'd just like to touch base briefly now on our trailblazers. It's the outer ring of our platform.
Our Ohana is so important to us, but especially our trailblazers. And we've got a 1,000,000 of these trailblazers who are powered and enabled with all of this capability and they're doing that on Trailhead. For those of you who have not been on trailhead.com, please get on trailhead.com. This is our free online learning platform. It's letting everybody go through the workforce development they need to get into the 4th Industrial Revolution, to have their
place in the digital economy. This is centered
to our strategy. Customers are on Trailhead have self reported. That's customers are on Trailhead have self reported that they have changed jobs because of skills they've gotten on the platform and the jobs they're getting are these phenomenal 6 figure jobs and we're so excited for all of our trailblazers and our goals are to get to millions and millions of these trailblazers. So we're really excited. We also saw that we have received continue to get some great recognition.
And of course, paramount to Salesforce is our culture. Keith and I work on that and at the end every day. That's reflected in our core values of trust, of customer success, of innovation, of quality, but our culture is very important for those of you who've been to any of our towers around the world, whether it's Indianapolis or London or Tokyo or New York, I can tell you, you can feel it when you walk in. The culture is so important to us and we're trying to cultivate a great culture. But thank you, Fortune Magazine Ranking Salesforce.
Again, it's the number one best place to work in the world. And that is not just true globally, but in so many of the cities also that we do business in. We've been called out by Fortune Magazine. So thank you for that. That's so important to us.
And also I also want to thank Harvard Business Review called out Salesforce and obviously they said top CEOs in the world, but really calling us out as number 6 top company in the world, Harvard Business Review and number 1 American company for best performance for 2018. So thank you Harvard Business Review. We're very, very grateful as well to you. We saw this quarter how the two parts of our vision at Salesforce, changing the way the world does business and improving the state of the world, go hand in hand. At the Global Climate Summit in San Francisco, many of you are with us, Salesforce united with 21 other tech companies in the step up declaration to decarbonize our companies.
We realize it's more important. World Economic Forum says that by 2,050, we're going to have more plastic in the ocean than fish. Who wants a plastic ocean? I don't. We're deforesting, losing 1 acre of forest every single second.
Who wants to plant it without forest? I don't. We need the forest right now more than ever. And this was evangelized by Jane Goodall at the conference because of the carbon situation. So we've got to improve our situation with our climate.
So we've continued to focus with others in our industry to decarbonize and to improve our relationship with the climate. Onward to public education, Moving into the 4th industrial revolution, we've got to bring the kids with us. That's why we've now put more than $50,000,000 in our local San Francisco and Oakland public schools. This is halfway to our short term target of $100,000,000 And everyone knows that we are thrilled that San Francisco passed Proposition C, amazing, and record turnout, incredible turnout. San Francisco is coming to the polls realizing that we could do something together, which is pouncing Proposition C, spoke to the Mayor this morning and we are very excited moving forward with Proposition C.
The city will begin collecting the tax January 1 and looking forward to getting that into the hands of the amazing NGOs that we have here in San Francisco, like Hamilton Families, like Larkin Street, like Clyde, like Catholic Charities, so many people here helping our terrible, horrible homeless situation and we experience it every day being here. And I know many people who live in cities in the United States are experiencing bad homelessness and there's so many things that we can do. We learned so much during Prop C and saw so many great insights. But the number one thing that every homeless person needs is a home. And at this time of the year during the holidays, all of those homeless people are on our minds more than ever.
And thank you for your strong support here in San Francisco and the largest and most successful businesses all coming out for the good of the homeless. And thank you to Twilio now for giving $1,000,000 Thank you to Airbnb for giving $5,000,000 to homelessness since Prop C. Others are now able to come in to support the homeless situation. And we plan for another major announcement this week regarding the homeless. So be on the lookout for that.
It's another reminder, business does not exist in a bubble. We're part of a city. We're part of a community. We're part of the ohana. We're part of a planet.
And we realize we're all connected, we're all 1, that our companies are only as strong as these connections in our communities. And that's something that Keith and I are talking about all the time, how Salesforce can be a light unto the nations and be a beacon for others and show what is possible when business becomes one of the greatest platforms for change. And with that, let me turn it over to our Chief Financial Officer to talk about how the company did during the quarter. Mark?
Thank you very much, Mark.
As you've heard, we delivered strong 3rd quarter results as we continue to execute at scale. 3rd quarter revenue grew 26% in dollars and in constant currency, despite experiencing a year over year FX headwind to revenue of $15,000,000 and a sequential FX headwind to revenue of $19,000,000 Alnealsoft contributed $128,000,000 to total revenue net of purchase accounting adjustments. Looking at the year over year subscription and support revenue by cloud, Sales Cloud grew 11%, Service cloud grew 24%, platform and other grew 51%, including approximately $105,000,000 of MuleSoft and marketing and commerce grew 37%. Dollar attrition exited the quarter below 10%. Operating cash flow was $143,000,000 up 14% over last year.
3rd quarter OCF included our first bond coupon payment of approximately $44,000,000 on the MuleSoft acquisition debt. Unearned revenue ended the quarter at nearly $5,400,000,000 up 25% in dollars and 26% in constant currency with MuleSoft contributing approximately $103,000,000 Unearned revenue was impacted by year over year FX headwind of $34,000,000 and a sequential headwind of $39,000,000 in the 3rd quarter. We've always said that unearned revenue can be lumpy due to invoice timing, renewal timing, duration changes, etcetera. And we saw that in the Q3 where unearned revenue came in a bit better than our guidance. This had the effect of reducing the quarter on quarter sequential decline in unearned revenue from Q2 to Q3 we have historically seen.
This also has an impact on the sequential change from Q3 to Q4, which I'll discuss in a moment. Total remaining performance obligation, which represents all future revenues under contract, ended Q3 at $21,200,000,000 up 34% over last year. MuleSoft contributed approximately $300,000,000 to the balance in the quarter. The current portion of the remaining performance obligation
business that's both billed and unbilled
and as it is expected to be recognized as revenue in the next 12 months, was $10,000,000,000 up 27% year over year. Moving on to guidance, we came off a strong third quarter results. We are now once again raising our full fiscal year 2019 revenue guidance to $13,230,000,000 to $13,240,000,000 for 26 percent year over year growth. This guidance includes approximately $375,000,000 from MuleSoft. We expect to deliver non GAAP operating margin improvements of approximately 50 basis points at the high end of our prior guidance range even while the demand environment gives us the confidence to continue investing in MuleSoft and other growth initiatives.
We are raising our FY 2019 GAAP diluted EPS guidance to 1 point $6 to 1 $0.07 our non GAAP diluted EPS guidance to $2.60 to 2 $0.61 And keep in mind, this guidance does not take into account the possible future impact related to ASU 20 1601. We are maintaining our full year fiscal 2019 operating cash flow growth guidance of 15% to 16% year over year. As we discussed previously, this guidance includes a headwind of approximately $150,000,000 related to our acquisition of NealSoft. For Q4, we're expecting revenue of $3,551,000,000 to $3,561,000,000 a GAAP diluted EPS of $0.08 to $0.09 and non GAAP diluted EPS of $0.54 to $0.55 Turning to unearned revenue, we expect 4th quarter year over year unearned revenue growth of approximately 17%. This implies a sequential growth rate of approximately 52%.
Let me take a moment to provide some additional context to this UR guidance.
First,
the FX environment has changed significantly over last year and we now anticipate a year over year FX headwind to UR of approximately $200,000,000 in Q4 versus an FX tailwind of approximately $130,000,000 in Q4 of last year for a $330,000,000 FX swing year over year and now that represents about 5 percentage points of growth. Secondly, as you may recall, in Q4 of last year, we had an extremely strong renewal quarter including some of the largest renewals in history. This drove outsized growth
in our billed and unbilled deferred revenue
in Q4 of last year. And thirdly and finally, as we discussed at the most recent Investor Day, the timing of invoices and renewals can impact the UR balance in any given quarter. 3rd quarter's UR came in ahead of our guidance and as a result of this dynamic, which has a direct impact on the UR balance of successive quarters and the related sequential changes. As a reminder, this is the last quarter we'll provide unearned revenue guidance. That said, when we report our 4th quarter results, you will have 2 full years of data on the current remaining performance obligation, which we think is a more complete metric because it's contract based versus invoice based.
Now moving on to FY 2020 guidance. As you've heard from Keith, our demand environment remains very strong. And as a result, we're initiating fiscal 2020 revenue guidance of $15,900,000,000 to $16,000,000,000 for a year over year growth of 20% to 21%, keeping us on track to deliver our target of $1,000,000,000 to $23,000,000,000 of revenue in FY 'twenty two, now only a little bit more than 2 years away. We will provide our cash flow, EPS and non GAAP operating margin guidance for FY 2020 when we report our Q4 and full year results in February 2019. To close, we delivered another strong quarter results and we have great momentum as we look to close out the year.
I want to thank our employees, our customers, our partners and our shareholders for your continued support and I wish you all a wonderful holiday season. And with that, let's open up the call for questions.
Thank
you, sir.
Our first question will come from the line of Karl Keirstead with Deutsche Bank. Your line is now open.
Thank you very much. Maybe a question for Keith and Mark. Keith, you did mention you've been in front of a lot of customers of late. I'm just wondering whether the tone of those conversations have changed much in the last few months, just not so much in terms of their sales force projected spend that sounds like it's very strong, but just a broader view of the economy and the macro. Don't want to force you into being an economic forecaster, but just wondering if the tone has shifted at all.
And then maybe a follow-up for Mark Hawkins. Mark, given that the performance on operating cash flow through the 1st 9 months, you only need about 5% operating cash flow growth in 4Q to hit your 16% growth target. You obviously much higher than that last Q4. I just I know it's hard to predict and it's based on timing of invoice payments, but just curious if there's anything you'd flag for us? Thanks so much.
Yes. Hi, Karl. It's Keith. So I have been on the road quite a bit actually in the quarter. So I've had the opportunity to spend a lot of time on the front lines with the troops in our customers.
And here's the message I'm hearing. It is all about digital transformation. I am not going to make any comments about the macro environment. From what we see, it's all good. And this is a CEO level agenda.
This transformation is important. The sense I get, regardless of any speculation around the environment, the economy is that this has really become a mandate. And this wave of innovation, this wave of technology that is sweeping the globe is an imperative for these CEOs to be those Chief Transformation Officers. And that's what's going on in the market and that's why you see the results with us.
And let me just add to that, that I think I said this a little bit already at Dreamforce as well, which is and I've said this recently on TV when I speak to CEOs and that happens probably every single day, especially since these tax cuts that have happened, CEOs have been investing aggressively and the economy has really been ripping. I think that a lot of the forecasts that I've seen on the 4% level in the United States, we felt that before that happened and we were talking about the was ripping even before those aggressive growth estimates. When we look out for next year, I mean, I'm not sure I could see it going faster than it is now because I'm not sure that we where we can get all the people to hire that we need to hire. Like it's amazing what's happening and not just for us, but for all, for everybody. But maybe there's a modest reduction in growth.
If it's 2% to 3% next year on the GDP, I wouldn't be hugely surprised. But I don't see some huge sea change in the economy. I consider to see strong growth because I've seen so much investment this year that's going to pay out for these companies going forward. So I see still several years ahead of good solid growth for the economy. And where that gets tempered, I think I've mentioned this before, is when I talk to European CEOs, they tend to be more conservative.
And some of those CEOs, they maybe specifically in their region are not as optimistic potentially as, I would say, American or Asian or CEOs based in Asia. So, that's how I still look at it, that we are still in the economy right now and look at these numbers that are ripping and we still see very much a huge investment focus going on.
Yes. Let me just jump on the second part of the question, Carl. You for that. Yes, we're obviously pleased with our operating cash flow performance year to date, as you've called out. We're very much tracking the fiscal year number that we have been driving toward ever since we acquired Bealsoft, which as we called out the $150,000,000 impact that would be negative in the 1st year of the acquisition mainly due to debt expense and some lost interest income.
But when you the other factor to look at that besides the fact that we're absolutely tracking our fiscal year is Q4 is one of the biggest quarters of the year for us and obviously we'll know more as we get to the end of that. We feel that this is appropriate to stay with the fiscal number, especially in light of the fact that Q4, there's clearly an FX headwind if you just look at the FX rates year on year. That's another factor to be considered. We're staying on track for
the year. We'll know more at the
end of the quarter. But given the FX headwind, I think this
totally appropriate.
Thank you. And our next question will come from the line of Philip Winslow with Wells Fargo. Your line is now open.
Hey, thanks guys for taking my question and congrats on a great quarter. Just really want to focus on just the concept of the front office suite. Obviously, you guys have talked about that for several years now and we're obviously believers. If you think about this year, we've seen probably north of $15,000,000,000 of M and A from some of your competitors trying to build out different pillars of a suite. What are you hearing from your customers in terms of just the competitive landscape, especially sort of post this M and A?
And even beyond the M and A, some of the data sharing initiatives out there between frenemies, what are you hearing from customers? How do you think about how the landscape has changed?
Well, I think that we should ask our President of Products, Fred Taylor, is here to kind of give you his vision of where we're going with our customer success platform.
Yes. I think our strategy as it relates to competition is really reflected in our GreenForce announcements, particularly Customer 360. We talk to our customers, they're not looking to buy a piece of technology, they're looking to transform their business. And our strategic advantage is that we're the number 1 in sales, the number 1 in service, the number 1 in platform, the number 1 in marketing. And if you look at Black Friday, I think you can really see this in the way our customers are using every single one of those technologies to transform their customer experience.
You might send out a promotion for your Black Friday sale via text message or via email in our Marketing Cloud. You transact in our Commerce Cloud and you provide service via our Service Cloud. We are the only company that provide all of those solutions in an integrated way. And now with Customer 360, you have a single view of your customer through all of those touch points. And so our strategic advantage relative to competitors who are trying to catch up by acquiring the 2nd place product in each of these spaces is that we are an integrated solution.
And Keith and I have talked a lot about this. Our customers are looking for an integrated solution to their business problems, not just pieces of technology and that's our strategic advantage in our product portfolio.
So Brent, you've done a great job. I mean, when we look at that product portfolio and we look at what you've built out with the customer success platform, you've got, of course, sales, you've got service and field service, you've got marketing, you've got B2C and B2B Commerce, you've got engagement with Heroku, which still remains on a tear, You've got platform and this incredible ecosystem. You've got integration, not just with Customer 360, but if you've led this work with MuleSoft, you've got advanced analytics, the work with industries, you saw how well Financial Services Cloud did this quarter, get partners and communities, enablement, collaboration. And on all of that, you have that whole trailblazer community. I don't think there's any company that has built out a comprehensive customer success platform like that.
Now when you got to Dreamforce and saw it all tied together with Customer 360, what was your biggest surprise? My biggest takeaway was the
importance of Trailhead in that Trailblazer community. Essentially, when one of our customers decides to deploy our technology, we're not the only person there helping them. Our partner ecosystem is there with them. And that partner ecosystem is fueled by Trailhead. One of the things that you mentioned, Mark, in your opening, I think is really powerful, there's over 1,000,000 people learning for free on Trailhead and 1 in 4 have gotten a new job on the other side of that because they're developing new skills.
And the way you should think about it from our customers' perspective and the thing you see in spades at Dreamforce is when someone decides to deploy Salesforce, they have the best ecosystem of support and the best partner community around them. That's really what's driving thing that we are exclusively focused on.
Thank you. And our next question will come from the line of Derek Wood with Cowen and Company. Your line is now open.
Great. Thanks. Keith, one of the things that we commonly heard at Dreamforce is that partners are finding it harder to hire and build up sales force certified resources to meet the demand, which is, I guess, essentially saying that demand is outstripping supply from a consulting and implementation standpoint. Do you hear this as a trend in the field from your partners? And do you ever see it weighing on pipeline conversion cycles?
And then you were just talking about Trailhead, but I know it's been in the market for a little bit. How effective do you view Trailhead in helping to virally cultivate resources and can it help maybe populate talent in a quicker fashion than you've historically seen?
Yes. So, thanks for the question. So, as
you know, the relationship that we have with our partners is very strategic to our business. You heard me talk about in the call that they're involved in about 64% of our go to market efforts. And the certifications, 19 consecutive quarters of double digit certification growth. I mean, there you go talk to any of these firms, whether it's PwC or Deloitte or Accenture or IBM and ask them what their fastest growing practice is at scale at Salesforce. And this is great news for our customers because we wake up every day, as you know, as a company and we think about what's important for our customers.
And the partner ecosystem is certainly a big part of that. We are very, very focused on our partners, and we have plans with them to not only increase their capacity, but also to enhance their capability. And the centerpiece for that is Trailhead and offering and extending Trailhead for them to make sure that they get the right skills at the right time, so that they can convert and cannibalize their practices from their legacy providers. And that's been a part of their strategy. We also encourage the growth of boutiques because it's not just in the enterprise based business.
It's also in the mid market and the SMB. And we invest as part of our funds with Salesforce Ventures to provide startups the opportunity to build and cultivate these boutique practices to help with
the SMBs. So we've got
a pretty comprehensive strategy to build out these SMBs, SMB boutique consulting firms, these Accentures of the world, etcetera. And in my entire career, I've never seen a closer relationship with the SI ecosystem like the one that we have at Salesforce. We do a lot of joint planning. There's a lot of collaboration. They're very integrated in everything that we do inside this company.
And again, they're a big part of our future and we're very optimistic that they will continue to expand and convert the resources they need to drive success for our customers.
So Keith, let me ask you a question. Let's say there's an entrepreneur who's listening on the call today and they're hearing what you're saying. Are you saying that if I'm an entrepreneur and I want to start a new company, starting the company providing these kind of boutique services in the Salesforce ecosystem, that's a good business opportunity. And is Salesforce investing in those companies? Are you going to invest?
That is a fantastic business opportunity and that's one of the reasons why we've got the consulting funds that have been set up with Salesforce Ventures around the world.
And then we've seen so many of those boutiques get acquired the mainstream SIs and motivate and grow their practices aggressively.
Absolutely. And the important thing for us to continue to do is to keep cultivating and growing those practices at the mid market space.
I mean, you look at some of these companies that were strong independent companies like Blue Wolf is a great example or Perio or some of the other, but they've been acquired now by the very largest and most important systems integrator. And so this remains a great opportunity for everybody. Absolutely. Terrific. Thank you.
Thank you. And our next question will come from the line of Kash Rangan with Bank of America Merrill Lynch. Your line is now open.
Hey, congratulations sales force team. I have a bit of a philosophical question. You're sitting on some big markets, massive TAM, 145,000,000,000 dollars but only one of your clouds is really dominant in terms of market share and its industry, which is Sales Cloud. I'm curious at what point like some of the commanding technology companies in the yesterday, whether it's Oracle in the database market or Microsoft in the operating system market, where they define the market. So at what point are we or how close are we to a tipping point where service, marketing, commerce, platform, all these markets really start to tip in your way that it's not really so much of outbound of course, there's always going to be outbound selling motion, but the market really starts to come to you.
You start to get these dominant shares in the other markets, so you can start to realize your TAM, $145,000,000,000 TAM in a more significant way? That's it for me. Thank you and happy holidays in advance. Well, Kash, I think you'd normally see this in the growth rate that we're reporting on all the clouds. So, this is not anything that we're trying to keep from you.
You can see it in the numbers that we are it's an abundant of riches at Salesforce. And yes, we have a great product with Sales Cloud that's doing just fine, but we also have a phenomenal service business and field service business and service add on business that's also growing extremely well. We also have an amazing Marketing Cloud business that's growing extremely well and commerce. And I mentioned Heroku, and it doesn't get reported, but it's part of our platform, obviously, very important part of our platform integrated, which is also a great business. And now we have an integration business, which is also it's an unbelievable business and we have an analytics cloud that's an unbelievable business.
And we have industries that Keith has cooked up with Financial Services and Health Cloud, which is also an unbelievable business. And we keep and we go and by the way, we acquired Brett Taylor's company, Quip, which is an unbelievable business. And just did a huge deal with Citibank for the quarter. That was awesome to see what Citi did with Quip, enabling all of their employees around the world. So, congratulations to Brett and Kevin helping Citi work together faster in this incredible productivity environment.
It's a product I use every day. If you haven't downloaded, it's worth it's what Amazon uses, it's what Apple uses, It's Citibank uses to manage their productivity. And you saw it at Dreamforce. We now have quick slides, which is incredible. But it's an abundant of riches.
And the key organizing principle though for us is the customer. So, yes, we're in all these areas, but there's other companies in service and there's other companies in marketing and there's other companies in a lot of these areas, but our organizing principle is that we're here to tie it all together to give you a 3 60 degree view of your customer, and that's what's unique for Salesforce. Every company has its own organizing principle, as you know, because you cover all these companies and you know what ours is and you know what our answer is going to be that everything begins and ends with the customer. Brett, do
you want
to add to that?
Yes. I think Mark put it exactly right. And the backdrop that I'm really excited about and the reason why I think you see such amazing growth in service cloud, platform, marketing cloud and continued growth in our sales cloud is these product areas aren't staying still. The 4th industrial revolution is transforming each of these markets. Take Service Cloud, which is just an amazing product with an amazing growth rate.
Right now, artificial intelligence is completely transforming that industry and it's driving every CEO to Salesforce to say, hey, how can you help me transform my customer service experience, which is really the tip of the spear as it relates to customer experience. And that's why our service cloud is growing 24% year over year, one of our largest and fastest growing businesses. And you're seeing this in every single cloud. So as the technologist here, what's exciting for me is not just really TAM, but also just seeing the motion of change in each of these businesses and how we can help our customers navigate these technology changes happening around them.
Thank you. And our next question will come from the line of Pat Walravens with JMP Securities. Your line is now open.
Great. Thank you. And let me add my congratulations. So, MuleSoft is clearly proving to have been
a great decision for you.
What sorts of things might make sense for Salesforce to buy next? And then Mark, I'd love to hear your thoughts if it fits in there on SAP's acquisition of Qualtrics.
Well, I mean, I can just tell you that there's a lot of things that Salesforce can do because this customer opportunity is much bigger and more exciting, I think, than anybody really ever realized. But for MuleSoft, this is a company that I've loved for years. This is a company that I helped lead, our early investing in and then helped we helped them go public and so forth. And while I wanted to buy them for years, unfortunately, I have a very strong and stubborn management team that's sitting around the table and they're not that easy to deal with and they make it hard for me to do what I want to do, but I did get that one over the line. So thank God for that.
But there's a lot of others that I would love to see that I think that our customers would love to have more tightly integrated, more part of our product. It's really important. And look, other companies I don't know if you've seen the front of The Wall Street Journal lately, but we put a market share graph on CRM on the cover of The Wall Street Journal. Have you seen it? I don't know if we also put it in our slide deck here for you.
Hopefully, we did because it's our number one marketing graphic. And not everyone is doing as well as we are in CRM. So, and not everyone is doing as well as we are in cloud and you know that. So, every year they've got some new thing, whatever, and I can't follow them all because they're also difficult and they buy companies I've never heard of, so I can't really comment on them. But God bless them.
And I hope that they're successful in CRM because it's been good for us.
Thank you. Our next question will come from the line of Alex Zukin with Piper Jaffray. Your line is now open.
Hey, guys. Let me add my congratulations to the quarter. I want to ask a question about verticals, maybe to Keith. You talked about some amazing success in financial services, the big deal with the financial institution with the success being driven by Financial Service Cloud, which we also picked up in our field work. I guess I wanted to understand, could you talk about what is the incremental kind of value prop and features that are available to customers that go from generic service cloud to financial service cloud?
And any commentary on the financial uplift that Salesforce sees through those migrations would be appreciated. Well, hi, Alex. Listen, I'm happy to get into a feature function conversation with you if you'd like. But here's the way I would think about Financial Services Cloud. So first, in the beginning of time, there was the Service Cloud, right?
And then on the 7th day, God created something else and Ellison said it was Financial Services Cloud and then Financial Services Cloud started on in Wealth Management, then it went from Wealth Management to Retail Banking, then it went to Consumer Banking and then it will go to Commercial Banking and the list will go on and on. And by the way, Financial Services Cloud has made great integration points with partners like Guidewire and Velocity as well. So those are compelling solutions for our customers. At the end of the day, this is a capability that customers want to buy off the shelf software. They don't want to be customizing and building their own capabilities because
in a
sense, it's just repayment to CalPath. You're just doing, in fact, refresh, but really you're
not retiring your legacy debt and
that's why customers want these capabilities embedded in our technology. And that's exactly what we're doing. We're responding to our And that's been the strategy. Now we can do that 2 ways. 1 is that we can enhance our product so that these customers get the commercially available off the shelf software, or we can go partner with an ISV like an Encino or Velocity or Vios that I mentioned.
So that has been our strategy. You can see the results. If you think about the pace of Financial Services Cloud, arguably it's the most successful cloud that we've ever launched. It has established very deep and meaningful relationships with our customers. The roster of financial services companies that we're doing business with now, they all want Financial Services Cloud and we just continue to win and win and win in that space.
So, it's very, very exciting for us.
And for the previous question where there was a question about how we're doing with our competitors, I put on my Twitter feed for you the market share information so you could get that directly.
I do want to make a comment about the competitors because I've been listening to Mark and Brett talk about this. And just a lot of these companies have been in the business a very, very long time. They've been in the legacy business. They have not been in the cloud business. They claim that they could be cloud companies because maybe they have an architecture that suggests they're part of the cloud.
But it's not just about the architecture, it's also about the business model, but most importantly, it's about the culture of the company and the focus on the customer. And since the day this company was started, everything that we do is focused on the customer. If you go look at some of these legacy companies that are trying to get in the game of the front office and say that they're now CRM companies, it's not in their DNA. So as Mark said, we wish them luck and
we'll see you
in the marketplace, but please don't underestimate the importance of having the customer as part of
your culture. And I've really had to start to curtail my comments. And as I'd love to talk about specific companies and other CEOs, every time I do, I get a phone call. They're very sensitive and I don't want to hurt anybody's feelings during the holidays. So I'm really holding back on this call.
So I'm just going to
do that one tweet. Thank
you. Our next question is coming from the line of Tom Roderick with Stifel. Your line is now open.
Hi, gentlemen. Thank you for taking my questions. So a question for Marc Benioff. Marc, you're constantly in touch with global tech leaders, partners. And going back to Dreamforce, you certainly had some nice updates relative to Google as a partner, some of the things you're working on there.
They of course have had some changes at the leadership at the top. I'd love to hear a little bit more if you could talk about how that partnership has progressed. And now that they are sort of going through some new leadership changes at the top, what sort of opportunities exist to further extend that partnership? AWS has been fantastic. This one has a nice sort of start off the ground with the analytics side.
Where can you take it from here?
Well, you just mentioned 2 great companies, Amazon and Google, who both have both phenomenal cloud offerings. They both have very strong CEOs. Andy Jassy is amazing and also Sundar is amazing. And they're both doing extremely well in our customer base. We see lots of action with both of those customers and partners.
And specific to Google, I mean, Brett obviously is the creator of Google Maps and worked with Google for a while. So I don't know if you want to touch on how you have a unique perspective in all of this. Yes.
I just know it's such a great privilege to have such amazing partners. And we really work backwards from customer success and what our customers need to be successful. When I look at Amazon Web Services, Apple, Google, we're really saying, who are the companies that our customers want to partner with and who do they want us to partner with to drive success? And when I look at Google, every single one of our Marketing Cloud customers, Commerce Cloud customers has a deep relationship with Google because of the providence of Google Search, their ad network, marketing, analytics. And so I really view it as an amazing opportunity to bring the best of both companies to bear when we're trying to provide these solutions to our customers.
And our customer response has just been fantastic. And I hope to deepen that relationship in the future and just make sure that when we provide these solutions to our customers, the products work together, our companies work together and our customers have an amazing experience.
Thank you. And our next question will come from the line of Jennifer Lowe with UBS. Your line is now open.
Great. Thank you. As you start to talk with CEOs and senior decision makers about these big strategic digital transformation projects, and you mentioned many of them are multi year in scope, scope. It strikes me that these touch a lot of systems, a lot of processes and it's a challenge to sort of figure out what comes first. But as you sort of start through that prioritization process, how often are you going in and creating a new application that didn't exist before versus replacing legacy off the shelf software versus custom app development or replacing legacy custom applications?
And how has that evolved as you increase your strategic value to those customers?
Yes. Hi, this is Keith.
So that's a great question. The way I would think about this is that the whole environment is just right for innovation, okay? The innovation could be something that's custom developed with our technology or it could be something that's just using our standard products. Obviously, customers like to take advantage of the flexibility that our products provide, and they want to model their processes aligned to our technology rather than building custom apps themselves, comma, the power of the technology is such nowadays that you can do amazing things that you couldn't have done before. So, it's kind of hard to give you an apples to apples comparison.
But it's really an interesting phenomenon because the wave of innovation is just so impressive in what we're seeing in the marketplace. And that innovation is supported by our platform. It's supported by our Service Cloud, our whole customer success platform. So it's hard to give you an exact number, but it's all about innovation and creating the art
if possible.
All right. Well, as
we bring our call to a close, I want to thank everybody for participating on today's call. As I opened the call, I also mentioned our hearts remain with everyone who suffered during the horrible fires. And I'd like to bring your attention to our local organization who is doing so much and has done so much support already, which is our North Valley Community Foundation, which is providing tremendous support for the Camp Fire Relief. And if you could support them, we would appreciate it. It's n vcf.orgasinnancy, Victor, Charlie, Frank.org, North Valley Community Foundation.
And our hearts are with the entire community of Paradise and the surrounding areas affected by the Camp Fire. We would love for you to please consider a tax deductible donation to the Camp Fire Relief Fund and to assist in the many community organizations who are serving evacuees and especially our tremendous first responders. So thank you everybody and we look forward to talking to you again
next quarter.
Ladies and gentlemen, thank you for your participation on today's conference. This will conclude our program and we may all disconnect. Everybody have a wonderful day.