Well.
Good afternoon. My name is Doris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Salesforce Q3 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I will now turn the call over to our host, Mr. John Cummings, SVP of Investor Relations. Sir, please go ahead.
Thanks so much, Doris. Good afternoon, everyone, and thanks for joining us for our fiscal third quarter 2017 results conference call. Our third quarter results, press release, SEC filings, and a replay of today's calls can be found on our IR website at www.salesforce.com/investor. With me on the call today is Marc Benioff, Chairman and CEO, Keith Block, Vice Chairman, President, and COO, and Mark Hawkins, CFO. 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 our 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, actual 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-Q. With that, let me turn the call over to Marc. Hey, thanks, John, and thanks to everybody for joining us on the call today. We're coming live to you from New Jersey, where we have the whole team, and we spent the whole week here in New York and having a great time, and it's been great to be here. We just opened our new Salesforce Tower, which is the former MetLife building at Bryant Park. Really cool, great new space for customers, partners, employees. Love to invite all of you there to see what we're going to do with this incredible new building in New York.
Salesforce Tower, New York is open, and all the signage is going to be going up over the next six months. We're really thrilled. We're in the first floor. I couldn't be more excited to be here. Hey, we're looking forward to having you all visit us there. Okay, let's get right to it. You can see from our results, we had an exceptional third quarter. Revenue rose to more than $2.1 billion, up 27% in constant currency from a year ago. You know already there is no other top 10 software company delivering that 27% number. What I'm really excited about is we expect to deliver, well, more than $10 billion in revenue in fiscal 2018. I think we initiated guidance at $10.15 billion at the high end of our range, and now we're setting our sights on our next goal, $20 billion.
Look, no other software company, no enterprise software company is delivering this kind of growth at this scale, size. We're already off to a great start. Deferred revenue, third quarter grew to $3.5 billion, up 25% in constant currency from a year ago. Dollar value of book business on or off the balance sheet, more than $12 billion, up 27% year-over-year. That's a great predictor for next year and why we're so aggressive about giving this incredible $10.1 billion-$10.15 billion number now because we have that $12 billion on the balance sheet that's in the deferred. Let's talk about this. We are really well-positioned for the future. Everyone at Dreamforce saw that. We are having an incredible year. We're growing in this mid to high 20s range, and we've scaled from $4 billion three years ago to $8 billion this year. We see tremendous opportunity ahead.
Now, today, we're trusted by a global community of a billion customers, consumers, citizens, partners, and employees. That's a huge responsibility on our shoulders. What we're excited about is serving all these incredible people all over the world with our services. Just look at our new Commerce Cloud supporting 300 million unique shoppers a month. You saw Adidas, and I love this story, 10,000 pairs of Yeezy shoes. To Kanye West, you did a great job on the shoe. In a single hour through the Salesforce Commerce Cloud. Thank you, Kanye. Thank you, Adidas. That's amazing. Our Marketing Cloud, processing 600 million social posts and more than a billion messages a day, really exciting. 400 million consumers using that service. You just look at customer-facing apps built with Salesforce Heroku, companies like Macy's, Toyota.
We're operating at an incredible scale, and now an incredible level of momentum as well. Over the past several months, I've been spending a lot of time on the road with our customers. I love being with our customers, and this week, of course, was no exception. I'll tell you what I continue to see is this incredible community that surrounds us, and it's been awesome to experience that. I just went through that. I just did the Dreamforce keynote again yesterday here in New York, and just having all of these customers so excited about our future, understanding this amazing platform that we've built, the future, B2B and B2C CRM. You saw this come to life at our sold-out Dreamforce conference in September, which was way beyond our expectations. I know a lot of the conferences this year have not delivered their results, but Dreamforce did.
That was awesome. You saw not just the 170,000 people registered, and everyone was there, and so you saw it was packed, but more than 15 million people joining online. That was a huge surprise for us. At Dreamforce, you also saw how we're continuing to innovate with Lightning, with Einstein.
It's been really, really, really awesome. Of course, probably the most exciting announcement at Dreamforce for a lot of our customers has been Salesforce Einstein. We've extended our Salesforce platform, not just with this incredible UI with Lightning, not just with this incredible BI layer with Wave, but now we've extended our Salesforce platform once again with an AI layer with Einstein, and it's really the world's easiest AI. That is, all of these partners, all of these customers are able to easily inherit all of the most state-of-the-art artificial intelligence, whether it's machine learning, machine intelligence, deep learning, right inside the Salesforce platform through Einstein. We're extending that Salesforce platform with amazing new capabilities, with new technologies, new talent, new platform functionality. You saw that again this quarter, where we have acquired this incredible DMP, Krux, extending our Marketing Cloud.
Of course, everybody knows, if you've been around me at all, you see how our whole company now has 20,000 users on Quip. Of course, Facebook has thousands of users on Quip, and other incredible companies like Electronic Arts and many others have thousands of users now on Quip. If you don't have Quip on your phone yet, and you haven't experienced Quip, you should just go to the App Store right now and download Quip, Q-U-I-P. It'll change your life. I'll tell you. You can really experience next-generation productivity with live collaborate documents and spreadsheets on our platform, integrated media. It is really cool. Bret Taylor, former CTO of Facebook, is now with Salesforce. Of course, the former legendary product manager at Google who did Google Maps, he and Kevin Gibbs, his co-founder, did just a beautiful job on that.
Well, anyway, I could go on and on and on about our products and technology and how exciting this quarter was, but let me turn it over to Keith. Keith, thanks for coming down from Boston and being here for the call.
Thanks, Mark. Thanks, everybody, for joining the call. Listen, Q3 was an outstanding quarter. We had excellent execution from the entire team in all of our key geographies and industries. We're really, really thrilled with the results. We also delivered very strong performance in large deals this quarter. Not only did we close a record number of seven-figure plus transactions in Q3, but the value of those transactions grew significantly. We continue to spend a lot of time with CEOs, and at Dreamforce, our CEO summit brought together some amazing thought leaders, and they're all looking to drive a new level of innovation in their industries around customer engagement. They recognize that they need an intelligent customer engagement platform that will help them stay ahead of rapidly changing customer expectations.
This level of dialogue and engagement with these CEOs of some of the most incredible companies in the world, they have put their trust in us, and that has been reflected in our results. For example, this quarter, we saw huge strength in financial services, where we signed strategic agreements with seven of the premier financial services institutions in the U.S., including Citi and PNC Bank. We're very, very excited about these stories. Let me tell you a little bit about PNC. This is a new relationship for Salesforce, and we're helping them streamline operations across all their primary lines of business so that they can reimagine the banking experience for nearly 11 million customers. All of their retail call centers and branches will now be powered by Salesforce, and that will help them respond to customers faster.
They'll also use Salesforce to mobilize their corporate and institutional banking team, giving them access to customer information on the go. Salesforce also signed a strategic agreement with Citi in the quarter, and this is Citi's global consumer bank that will utilize Salesforce for all client-facing personnel in their U.S. retail bank, enabling Citi to better serve clients while lowering costs and improving analytics and efficiency. It really is an incredible vision to transform their global consumer bank with a very highly differentiated customer experience. We had a landmark win with one of the world's largest consumer packaged goods companies who needed a complete CRM and e-commerce platform to help them transform from B2B to a B2C business.
I am having a lot of conversations with customers about this particular type of transformation, and this relationship was the result of excellent collaboration between Salesforce and the Commerce Cloud, which grew its comparable customer gross merchandise value by 22% in constant currency from a year ago. This is an early sign of the power of our combined businesses, and it is creating unmatched value. Other commerce wins in the quarter included GNC and Shiseido. Amazon is a great win in the quarter as well. We formed a strategic relationship in Q1, as you all know, and in Q3, that relationship has expanded, and they added even more services throughout the company. International continues to be an important cornerstone of our growth strategy. In Europe, we had a great win with KONE, one of the world's largest elevator companies.
Just last week, I spoke with KONE CEO, Henrik Ehrnrooth, and his team about our partnership to transform the multi-billion-dollar field service industry together. Very exciting. Their vision is excellent, and they're using Salesforce to mobilize more than 20,000 service technicians. With real-time customer information and service data from connected equipment, they will be able to provide more proactive service and respond to service requests faster than ever. Telecom Argentina, also new to the Salesforce family. They selected Salesforce to power all of their call centers and upgrade the in-store and online experience for more than 25 million customers. We partnered very closely with Velocity to show them an integrated solution in their industry, and it is a testimony of the power of our industry strategy, coupled with Salesforce's ecosystem and our ability to work effectively with our partners.
It is also proof positive that our ecosystem is absolutely blossoming. It's pretty clear that our enterprise strategy, coupled with our continued operational focus, is working. Our investments in key industries, our partner ecosystem, and our top international regions are paying off, and we are very well-positioned for a strong remainder of fiscal 2017. At this point, I'd like to hand the call over to Mark Hawkins, and he can share some more detail around the financial highlights for the quarter. Mark?
Yeah. Thanks, Keith. I'm very pleased with our financial results for the third quarter, let me just say that. Total revenue for the quarter was up 25% in dollars and 27% in constant currency, excluding a year-over-year FX headwind of $32 million. The Commerce Cloud is off to a great start and had an excellent quarter, contributing $49 million to total revenue after adjusting for purchasing accounting. Our dollar attrition for the third quarter, which excludes Marketing Cloud and other acquired businesses, remained below 9%. Looking at revenue by cloud, Sales Cloud grew 13% year-over-year, Service Cloud grew 26%, App Cloud and other grew 38%, Marketing Cloud grew 46%. If you exclude approximately $42 million of subscription and support revenue related to Demandware, Marketing Cloud grew 21%.
In our region, we delivered another strong quarter of year-over-year constant currency revenue growth in EMEA by growing 27% and Asia Pac by growing 29%. Before I move on to cash flow and deferred revenue, I want to remind you that invoicing seasonality is affecting both of these metrics. As we discussed at the last two analyst days, we continue to see an increase in the seasonality of invoicing, primarily as a result of compounding, and to a lesser extent, contract co-termining and a shift toward annual invoicing in Q4. In that context, third quarter cash flow was $154 million, down 5% over last year. Deferred revenue ended the quarter at $3.5 billion, up 23%. Deferred revenue includes approximately $30 million related to our acquisition of Demandware, up from $23 million in Q2.
On a constant currency basis, deferred revenue was up 25% when excluding a year-over-year FX headwind of about $49 million. On a sequential basis, deferred revenue had an FX headwind of $33 million. In the quarter, approximately 80% of all subscription and support-related invoices were issued with annual terms, excluding Demandware. The Q3 benefit to deferred revenue from the change in billing frequency was less than one percentage point of growth. Moving on to guidance. I'm pleased to be raising our full-year revenue guidance to $8.365 billion-$8.375 billion, despite absorbing approximately $100 million-$150 million of FX headwind this year. This implies year-over-year growth for FY 2017 of approximately 25%. We expect Demandware and other acquired assets to contribute about 1% to 2 percentage points of growth year-over-year. We are also raising our full-year non-GAAP diluted EPS guidance by $0.03 to $0.97-$0.98.
This raise includes 1% from operational outperformance, $0.01 from an investment gain in Q3, $0.01 from an anticipated investment gain in Q4. This guide continues to imply approximately 70 basis points of full-year non-GAAP operating margin improvement. We continue to anticipate full-year operating cash flow growth of 20%-21% year-over-year. For Q4, we're initiating revenue guidance of $2.267 billion-$2.277 billion, non-GAAP diluted EPS of $0.24-$0.25, and a year-over-year deferred revenue growth of 22%-23%. As you heard from Mark, we're excited to deliver our first $10 billion revenue milestone next year, as we're initiating FY 2018 revenue guidance of $10.1 billion-$10.15 billion. This implies year-over-year growth of approximately 21%. We plan to provide additional details about our outlook for FY 2018 on our fourth quarter call in February.
To close, we had a strong third quarter, we are well-positioned for a great finish to FY 2017, this sets us up for another strong 20%+ growth year in FY 2018. At this time, I'd like to thank all of our nearly 24,000 employees for their dedication to customer success and driving these outstanding results. With that, we'll open up the call for questions. Operator?
At this time, ladies and gentlemen, if you would like to ask a question, please press star, then the number 1 on your telephone keypad. Again, that is star, then the number 1. Our first question is from the line of Brent Thill with UBS.
Good afternoon. In Q2, you noted some U.S. weakness. It looks like in Q3, that came back. I was curious if you could just talk about the performance in the U.S. Keith, you were clear that these deals were delayed, not lost. Did they come back in in the quarter?
Yeah. I'm glad to answer that question. We did discuss on the last call that at the very end of Q2, we did have some weakness in the U.S., and that was attributed to execution issues. As I said on the last call, we did a very detailed and very disciplined operational review. We made some minor adjustments to our playbook, and some changes down the ranks. I'm very, very pleased with the results. This is a high-performing team. It's been a very high-performing team for a number of years, and they responded in kind. As far as deals, in any given quarter, there's an ebb and flow. Some come in, some come out. I'm very, very pleased with the execution in the quarter, particularly around these large seven-figure plus transactions. Again, these brands are absolutely fantastic.
You talk about a company like PNC Bank or Citigroup, even Amazon in the quarter. KONE, Telecom Argentina, many of these brands are world-class brands. Our performance was strong globally, across all theaters, all markets, all segments, all industries. Again, I think it is a quarter of execution, and very proud of how the team responded.
Our next question is from the line of Raimo Lenschow with Barclays.
Thanks for taking my question, and congrats on a great quarter. I want to dig in a little bit into the different clouds. Can you speak a little bit how you saw the performance? Obviously, Platform were strong. The Sales Cloud continue to be better with the higher value SKUs that you introduced. The Service Cloud moderated a little bit. Can you just kind of frame it how you see it? Maybe, Keith, question for you here.
Yeah. Again, we are very fortunate based on the vision of our CEO, who is sitting right here, to have an incredible product and a set of clouds that is second to none. Obviously, we are the market leader in virtually every one of these clouds, and super excited about the vision that we have put forth for our customers. Obviously, based on these results, our customers are super excited as well, and they serve as the inspiration and motivation for a lot of the vision, along with, of course, what Mark and the rest of the team comes up with here. I will tell you that we are very pleased with our Sales Cloud execution. We are very pleased with our Service Cloud execution. Proof positive around Service Cloud is that example I gave on KONE. This is a best-in-class service-oriented company, even though they are an industrial manufacturer.
They look to us to help them transform their business around field service, because this is a way for them to differentiate their product. Service is very strategic to their future, and it is just one example of how companies are looking at Service Cloud. Our Platform continues. Our ISV strategy is very strong. Our execution around ISVs has been very strong, which speaks to how strong the Platform is. We look at Marketing Cloud as a very strong product. We look at some of these acquisitions that we have made, the Commerce Cloud. We had a very large global CPG company, a very recognizable brand, that deal happened, because Commerce Cloud onto itself was very compelling, but when combined with our core products, made us even more compelling to paint a vision for that particular company. We love our product strategy. We love our vision.
Our customers obviously love our vision. This was only reinforced at Dreamforce, which was just an incredible event this year. We say that every year, but it was just an incredible event. When you start adding things like Einstein into the mix, which really is about the future, it just becomes more and more compelling. We definitely have the winds at our back and in our sails, and we are super excited about the execution and our vision for our customers.
Keith, I just want to add to that, I am sure everybody realizes, especially people who are at Dreamforce, this is a balanced portfolio, We have really a balanced portfolio, what is great about that is that, of course, we have talked about having a balanced portfolio geographically. We have a balanced portfolio in regard to our small and medium business, as well as our enterprise business. We also have a balanced portfolio when it comes to our products. You can see that in the numbers. Of course, Sales Cloud is one of the largest products in our industry, not just CRM, but in the software industry. To see it growing at 13%, I just think that is incredible to see that re-acceleration, and it is pretty awesome. I am really excited about that. Again, we saw service at 29%.
We saw App Cloud, another at 43%, marketing, 28%. What I really focus on is that we have a balanced portfolio of offerings, because as the Salesforce kind of gets different levels of comfort, by geography and by market segment, we see that shift quarter-to-quarter. Like a portfolio manager in a big institution, this big financial institution, they're keeping a balanced portfolio, so are we. Through that balanced portfolio, that's how we're achieving these high-performance results.
Yeah. In fact, Mark, I just would like to add onto that. I really see that when you look at the entire balanced portfolio, Mark, you look at the growth rate that we're putting up, which nobody's doing in our industry at this size and scale, what it translates in is this whole market share thing, Mark, where we gain market share. We gained 150 basis points at last report, we just continue to watch our competitors fall behind in this respect. Then lastly, Mark, to your point on portfolio, 27% growth in the Americas, 27% growth in constant currency in Europe, 29% growth in constant currency in Asia Pac. Mark, I think that underscores the portfolio point.
Our next question is from the line of Kash Rangan with Bank of America Merrill Lynch.
Hi, thank you very much. One question for both Marks. Marc Benioff, with respect to Einstein, when is the product going to be in GA, how are you as a company going to be gearing the Sales organization go-to-market strategy around Einstein? Then one for Mark Hawkins. I'll actually finish up the first question before the second one. Thank you.
You want to go? I think when you look at things like Einstein, you look at kind of these incredible directions, these shifts that are going on in technology. From a customer perspective, okay, we had an opportunity to meet with all the largest banks here in New York this week. Customer service, sales, marketing, these things, it's going to have an incredible shift, that is really what is just surprising to me. When you look back, we started this company 17, 18 years ago, where we are now, this was unexpected. From a technical perspective I went through some of those things, but whether it's our UI, the demos that I did with customers today were entirely on my phone. I'm giving CEOs of Fortune 100 companies, say, "Hey, I run my whole business on my phone." That surprises a lot of people.
To see the amount of information and insights that you can get from that is just incredible. Not just the UI, but business intelligence as well. I have Wave running on my phone. Mark Hawkins has Wave running on his. We both gave a Fortune 10 CEO a demo on our phones, they just couldn't believe that. I'll tell you that, it's now this AI, artificial intelligence, where everything's getting just smarter, it's helping all these users to actually point the direction of success. They know where to go. That is what is so cool. Of course, we're complementing that with the speed of our platform, with this unbelievable mobility, with this productivity from Quip. I think I talked about that earlier, that's a huge game changer for our customers. This is really awesome.
Then to see it as this integrated platform that our customers can execute against is very motivating for them. I think that that's really cool. Of course, Einstein is a huge part of it, you're going to see Einstein, of course, deeply integrated in everything that we do. Customers get that Einstein is different than other AI solutions. I've met with all the tech CEOs, of course, the cloud CEOs, they all have AI. It's table stakes AI. AI is table stakes. You all know that. Everybody's got it programmatically. "Oh, we've got the best AI. No, we've got the best AI. We've got the" Okay, fine. We all have it declaratively, okay, through our platform, because we need to bring it to millions of people, not just a few. There's only 15 million programmers in the world. We're much bigger than that.
We have to bring this to people who don't code or are low coders, or citizen developers need to have the power of artificial intelligence. They need the power of mobility. That's why Salesforce platform is so exciting, that our support clouds like sales and service are built on it. That is a huge differentiator for us, you can see it just in our win rates our competitive position has never been stronger.
Kash, you had a second question that you wanted to add in? Kash was disconnected, but Mark, so we'll just pause. Maybe we'll call back on the second question he had for me.
Our next question is from the line of Walter Pritchard with Citi.
Hi, thanks. Mark Hawkins, I guess I'm wondering if you could talk a bit about the synergies that you're starting to see or if you're starting to see synergies out of Demandware, principally from a revenue perspective. I'm curious in your Q4 guidance, if you've embedded anything additional to what you were maybe thinking three to six months ago.
Sure. Let me just jump on that, and then anybody else can add in if they'd like. We are so pleased with Demandware. We are so pleased to have this asset. It rounds us out. It's a unique asset.
That was just good fortune.
Oh my gosh, Mark.
I mean, Keith, you agree, don't you?
I absolutely agree.
We can't believe it. First of all, Keith loves having a company in Boston.
I'll second that.
Well, we also got HeyWire too.
Now we have two.
He's got a big smile on his face. Walter, I appreciate the question because, look.
Are you wearing the Yeezy shoes today, Keith?
I'm going to go get them right now, Mark.
How about the Vineyard Vines?
Okay, let's just keep going with that one.
Okay, well, I'll go with my numbers. Walter, I think what's interesting about this is we put out in the stub period announcement, $49 million in revenue, of course, you know that was haircut by about a third. We've snapped this in, when we talk about execution, everybody's been on it. We have a great team that's been joining us. They're working in with our broader company, we're starting to see the momentum pick up. Mark alluded to that in some of the activities. We see lots and lots of opportunity. From a synergy standpoint, we have a plan.
We can't go into great detail on all that, about where we're going to take this long term, including, as you would expect, Walter, lifting the company and its synergies, and really leveraging some of the best practices of Salesforce and some of the best practices of Demandware. Watch this frame to come, but the overall performance, I love what I see.
Our next question is from the line of Keith Weiss with Morgan Stanley.
Thank you guys for taking the question and echoing the comments on a really nice quarter. One of the areas that we've seen really nice acceleration in over the past couple of quarters has been the application platform. Anything in particular that's kicking in gear there? Is it the FSI is building, helping to build applications on it? Is Wave starting to be a more material contributor? Can you give us any incremental color on what's really working there? Maybe on the flip side, one area that has been decelerating has been Marketing Cloud. One of the things we're hearing a lot about in the marketplace is increasing competition, potentially from alignment of Microsoft and Adobe. Is that having any of an impact on Marketing Cloud and giving any pressure on that business and causing the slowdown there?
I think number one, we look at Microsoft. We sold more CRM software this quarter than Microsoft has sold in the last decade. It's just empirical. That is what is really awesome about our performance against Microsoft. I'll tell you also, when you look at
Marketing Cloud. I really look at that. We have so many unbelievable products. Keith knows I feel this way. I'm going to ask Keith to come in. I really feel we're distribution constrained. We have so much product. We are in so many amazing markets, whether it's sales, service, marketing, communities, analytics, application development, like you're talking App Cloud, whether it's commerce, whether it's IoT, whether it's productivity with Quip. The sales force is going to have that full portfolio of products. They are going to move back and forth against those. We've seen that. Look at our results over the last five years. You're going to see that constant up and down of those clouds based on that distribution organization performance. Keith, you're the absolute leader of the distribution organization. You probably have a unique perspective on this.
I think the bottom line is that we have an abundance of riches, particularly as it relates to our product portfolio. If I look at our field organization and the value proposition and the solutions that they can put in front of a customer, whether it's a line of business executive or whether it's from an industry perspective, it is incredibly compelling. That is really manifesting itself in these results. I would echo Mark's sentiment about what people have to carry in their bag and what they can put in front of customers. I also want to go back to part of the question around the platform and why we're seeing such great results in the platform. There's a bunch of reasons for this. Let me start with the systems integrator.
I think as everybody knows, we have really emphasized the importance of having an incredible partner ecosystem, particularly over the last three and a half years, and that has just paid dividends, whether you're talking about the largest SIs or the boutiques. We still have work to do there, but the team has really done a fantastic job there. Those SIs are really recognizing the value of the platform and what it can bring to their clients. That's one point I would raise. The second point that I would raise is that, initially when we sell or position a product to a customer like Sales Cloud or Service Cloud, customers are overwhelmed by how incredible it is.
They realize that the power of the platform extending sales and extending service, and that just lends itself to more usage and adoption and utilization of the platform product. Finally, back to my partner comment, we've had a huge emphasis on ISVs and the growth of the ISVs and making sure that we reinvigorate our AppExchange. Particularly around our industry ISVs, we've seen tremendous success. Why is that? Well, number one, they love our platform. They see all the capabilities, they see all the potential, and they want to build mission-critical applications on top of that platform. We do have a lot of great products in the portfolio that our sales team can deliver and our service teams can provide service to, and our partners can deploy.
We also have an incredible platform, and that is a lot of the secret sauce that we have in the company. Keith, I love your comment of abundance of product, abundance of riches in that way. Just adding on, Heroku, even on the B2C side, has been a nice adder to all the things that you had talked about. One of the things I see with customers is this whole notion of using Force.com, and they would like to self-brand, and they add on using Force.com, which is really neat that they can do that. Keith, I think you also have to really hit on some of these specific relationships, where you have the world's top SIs who have built phenomenal practices, heading towards billion-dollar practices, which is incredible for them, with these unbelievable service organizations.
You and I had meetings with CEOs of these top SIs who were at other user conferences, this quarter. We're not going to mention any names because their CEOs are very sensitive in this industry. These big SIs go into these other conferences, and they say, "Where's the vibe? Where's the energy? Where's the momentum? Where's the growth? Where's the innovation?" They are pivoting back to us. That's exciting to us because we can bring a large systems integrator, and we've talked, and by the way, they're standardized on us internally, companies like Accenture, like Deloitte, and so many others who are building these incredible, fast-growing practices. Customers are paying attention to that as well. Is that right? Yeah. Look, these SIs, a critical part of our strategy, these SIs are in the boardroom, along with us, and they are key influencers.
In fact, Mark, you and I have presented to quite a few of their boards. I don't believe that Microsoft or SAP or Oracle are being asked to present in the boards of these incredible SIs. It's a big part of our strategy. If you look at their growth of their practices, they're exploding, and they can't get enough talent, so they're cannibalizing the legacy practices of the companies that I mentioned earlier. Why is that, Keith? Why do we have so much CEO and board-level attention compared to, like, when we sold at Oracle, I never made a call on a CEO or a board, and I don't know how many of those you made. You were there far longer than I was. Yeah, just put it in perspective. I think it's very simple. These companies, these CEOs have an agenda of growth.
Our story is about growth. Their imperative is about growth. We are uniquely qualified as a company with this product portfolio, and quite frankly, our culture is an example of how to grow. Right. Because we are a double-digit grower, and all these other software companies are just single-digit growers, and they can't break out of that. This is what these customers want. They want to be double-digit growers. That's exactly right. We have the product portfolio and the vision to help them do that. Keith, I'm smiling, Mark. I was looking at Keith. We were in Davos, I won't mention the name, but one of the biggest SIs that you talked about in the world, talking about standardizing on Salesforce. Keith, you remember that discussion. I do.
Just that all came to be, and it's great to see them not only partnering with us, but using. Yeah. Just to that point, and both of you guys have mentioned this, it's one thing to build a practice, but when you also bet on your business because you're running Salesforce to run your business. I think that speaks volumes, and all the major players do.
Our next question is from the line of Heather Bellini with Goldman Sachs.
Thank you. This question is for Marc Benioff. Marc, it wasn't long ago that you set a $10 billion target. Obviously, you're going to achieve that next year based on your guidance. It does seem like you have a very good crystal ball versus others. I guess I'm just wondering, if you were to fast-forward to Salesforce hitting your new goal of $20 billion, what do you think would've been the biggest drivers if you were to look back? Which products do you think would be giving you or driving the most incremental revenue if you had to guess? How would you think about the margin trajectory of the company as you surpassed that feat?
Well, I really appreciate that, Heather. I'll tell you that I really think that in my core, I think that I'll get back to my comment about that balanced portfolio in our platform. What's unique, Heather, about our capability, you know this, is that we have an integrated platform. This integrated platform is exciting because not only is it the number one Sales Cloud in the world, not only is it the number one Service Cloud in the world, not only is it the number one declarative platform, okay, but it has all these other capabilities, mobility and AI and so forth, analytics and so forth. I think that when I look at the most incredible things that our customers have done, they weave these things together in really smart and creative ways.
They build these apps, they deploy these things internally. They look for speed. They're looking for speed. Of course, they want productivity. Of course, they want intelligence. Of course, they want mobility. They want that core platform. Because I think we built it right. Now, of course, we've also bought some great things that are outside of our core that we're integrating into our core, like our Marketing Cloud, like our Commerce Cloud, like Quip, okay? With Lightning, that's an incredible UI layer that no one has ever seen anything like this componentized application development UI layer. It's almost like a visual ETL. That is, these customers are now integrating this stuff together at the UI layer and, of course, at the data layer. That is what I think is going to really drive us forward. I think it's going to be our platform.
I think that when you look out, obviously, we have short-term goals around that $20 billion number. Heather, I'm sure you have your own model of when you think we're going to hit it. I think that for us, look, we want to make sure that, I don't know exactly when we're going to double the company by. My dream certainly is to double this. I would just tell you, my dream is to double this company within the next three to four years, for sure. That's really important to me. Amy Weaver here, who works directly for me, is my General Counsel. She doesn't want me to go any far. Amy, do you want to comment on that? Not at all, Marc. Not at all. Anything you want to say? No, I think you've said enough. I think so.
Obviously, we're performance-oriented, and we've got a great team. We have a great culture, you know that. We have a great brand reputation with our customers. We also have a level of transparency with you, the financial analysts and media that cover us. When you come to Dreamforce, you're untethered. We want you to go and talk to and be with our customers. You can feel the vibe, and you know, and when you come to all of our events, and I'm exact. In three weeks, I'm going to be in Tokyo, so please come and see. For those of you who still have not come to Japan, you really should come and see something incredible in Tokyo that we have in three weeks.
For those of you who don't want to go to Tokyo, in three weeks, we're going to be back here in New York, for a multi-thousand-person event, which is our World Tour. That's so exciting. The World Tour, Tokyo, and San Francisco are on the same day, for all intents and purposes. You're going to see a lot of market momentum this quarter as well as, Keith, you've got the fourth quarter coming up. Are you ready?
I'm ready, Marc. Don't worry.
You working out, and are you taking vitamin supplements?
I couldn't be in better shape.
He's looking stronger.
I'm looking good. It's all good. All right.
Our next question is from the line of Tom Roderick with Stifel.
Hey, guys. Thanks for taking my question. Keith, question for you. You made a comment that your big CPG win was driven by a customer whose desire was, I think, to shift from B2B more to B2C. Can you talk a little bit more about that deal in particular, and are you seeing other customers trying to make that shift? Also, with your portfolio now, with Demandware and ExactTarget fully integrated, is that something they're coming to you and asking particularly for your help? Just talk a little bit more about that transition with your customer set out there. Thanks.
Yeah. I love this question. Listen, we live in a world where, and Marc talked about this, where speed and mobility and productivity and innovation and intelligence are paramount, okay? This has become table stakes if you want to be part of the next wave of great companies. If you think about the classic business problem that any consumer packaged goods company has right now is they have to have a connection with that end consumer. Many times, they go through a retailer or distributor or whether it's a classic industrial company, or whether it's a consumer packaged goods company like a Unilever, they want that direct connection to the consumer. Moving that shift, keeping the B2B relationships, but also establishing a new model of B2C is very critical to their future. Think about We live in this world, we call it the age of the customer.
Think about cloud, mobile, social data, science, IoT, analytics, and artificial intelligence all coming together. New companies are born overnight. Barriers to entry into markets are being brought down. If you're not thinking about the future and how you're going to engage with your customer, whether you're a B2B company or a B2C customer, you're going to be in trouble. This is becoming a regular dialogue, and even more meaningful for us at Salesforce because of the Commerce Cloud. This is just another part of our portfolio that really helps to complete the package around these transformations. It is becoming a regular part of the conversation, and that particular win that I mentioned earlier, this is one of the world's greatest CPG companies, in many regards, and it's exactly about moving from B2B to B2C.
Our next question is from the line of Karl Keirstad with Deutsche Bank.
Thank you. This question is for Marc Benioff or Keith Block. I know forecasting deal timing is awfully tough, you've been generally pretty bullish about the fourth quarter, and I'm curious if you've got any different confidence level about those deals in the pipeline dropping in the fourth quarter. I know it's very early, but based on your recent customer conversations, I'm just wondering if the business uncertainty stemming from recent political events might have any bearing, good or bad, on the timing of large enterprise deals closing this quarter. Thank you.
Yeah. Okay, well, I think Keith and I both want to talk about that. I think there's a couple of things going on that are very important, and I want to make a few different comments. Number one, you all know that in the second quarter, we experienced a bifurcated headwind, which was not just in foreign exchange, which came out of Brexit and the great British pound, which we've continued to kind of suffer all year. That is, our numbers would be even more incredible, if we didn't, right, Marc? Yeah, exactly. What have we suffered here from foreign exchange this year? For FY 2017, Marc, we've had to absorb between $100 million-$150 million headwind. Yeah. We would be that much higher to your point, Marc. Number one, in that second quarter, we have this, you know the Brexit and the great British pound situation.
At the very tail end of the second quarter, as we discussed, we saw a little bit of weakness. To Keith's credit, and he said this, but I think it's very subtle, so I think it's worth amplifying. He made a number of changes. We made a number of changes, I think, that really let us perform well in the third quarter because we did see the market shift a little bit in the second quarter. We told everybody that, and it's not the first time that we've seen that in our careers. Keith and I have been to this rodeo before, and the selling motion had to change.
I think in companies that you've seen report in the last month or so who kind of saw or seeing that kind of market shift, they also will change, in the coming quarters, their selling motion because the selling motion has had to change in fiscal year 2017. We changed. You can see the results, incredible, even with this foreign exchange headwind. That's number one. Number two, in regards specifically to our fourth quarter, we don't talk about this specifically, but one of the reasons that we do have confidence around the fourth quarter is a certain percentage of that revenue is kind of contracts we've already signed. That is, we know we're going to get bookings in the fourth quarter because we have signed these agreements, and so that is coming in, and so that gives us a leg up.
Keith has an incredible focus through the sales organization, which is, as you know, essentially half our company is in sales, customer facing. That customer-facing organization, which is, I think, the best in the world, all wants to have a great fourth quarter, and they're focused, and we have made these cool adjustments. Do you want to just amplify any of that or augment or highlight any of that? Because I actually think there's a lot to learn. You and I have been coaching CEOs on how to kind of survive some of these ebb and flow, because I think that we both have a lot of confidence that we're going to see a lot of exciting things happen. I think there's a number of things going on here. We all know the story of the second quarter.
I don't think we need to talk about that. At the last earnings call, we said that we had a high degree of confidence in our Q3, obviously, we delivered the goods. We said that we also had a high degree of confidence in Q4, and we did make those adjustments. I do think that I'll echo Marc's comments. I think that we do have the best distribution organization in the world, certainly in this industry. It also allows us to talk to our customers about the things that they can do and adjust the way that they think about their customers and how they can sell to their customers and service to their customers and market to their customers. We're not abstracted from our customers. We are with these people every moment. We are, and this is what we do. We're living with them.
We live with them, and this is what we do. I'll tell you the other thing is, in regards to the election, I think this is really important. Look, some of us may not have had the outcome that we want. Some of us had the outcome we did want. In my view, it's in the past. We're moving forward, we have, at Salesforce, an open heart, we have an open mind, we also expect the best. That's what we're positive. We talk about that in everything we do. We've talked about how we cultivate a beginner's mind. You've heard us talk about, well, it's not just in regards to running our business, but even when there's an election, things have changed.
Yes, everything is changing, we have a beginner's mind, we have a sense of optimism for the future, we're going to cultivate that optimism, we're going to manifest it into our business.
That is how we operate here. We are positive people, and we are moving forward. I have talked to now a number of customers this week, and I have met with CEOs of some of the largest companies in the world this week, and in each and every case, all of them are moving forward, okay. We know what we have to do, and we need now to execute. I hope, as I said, that 2008 is behind us, okay. I've said this before. I've been optimistic about 2017 on growth. I've been counter to a lot of the global economists, and I'm going to still continue to feel positive about growth in the coming years, because I really hope that this 2008 tail, that we're finally through it.
Now that this election is also behind us, and I hope absolutely for the best now for everything going forward. This is what I want, and Mark and Keith are here with us in the room here, and you guys should weigh in here on this.
Mark, thank you. I'd love to add in on that because when we talk about that, Mark, exactly that, looking forward and the view and the tail that you talked about, and Keith hit something really key, building on this confidence in Q4, Keith, that you had talked about. Well, one of the things that we have chatted about that I think is good to share on the call is, when we exit, Keith, with Q4, we're going to exit with a $9 billion rough run rate in terms of revenue run rate, Mark. We're not only achieving our plan, but we're actually going to exit with a run rate of $9 billion. It's going to position us, and the guidance you heard for next year is going to be $10.15 billion at the high end. That's another really big milestone.
Mark, this guidance for the year with the confidence that you had talked about also implies two other milestones we have never hit in the history of the company. One is that in this FY 2017, our guidance implies a billion-dollar-plus operating margin non-GAAP milestone. This is something we've aspired to, and that's going to achieve with this particular guidance for this year, Mark. The last thing we're going to achieve is another milestone we've never, ever done, which is $2 billion plus on the operating cash flow. These are things, Mark, that I think quantitatively are milestones that support this idea. Keith, I don't know if you want to comment on that.
Yeah. Again, I think the results speak for themselves. There's a lot of dialogue out there. Mark mentioned it about the tail from 2008 and the presidential election. Look, at the end of the day, at Salesforce, our story is about growth. Our message is about growth. Our products and vision inspire growth. What CEO does not want growth? I think that says it all. I think we are well-positioned because-
Mark, we want the best for our employees-
Absolutely
for our customers, for our partners, for shareholders, and for our community and all the organizations that we support. We want that. We want the best for everybody.
You bet.
Our next question is from the line of Abhey Lamba with Mizuho Securities.
Thank you. Keith, can you please discuss deal dynamics, as you're seeing very strong growth in annual contract value from existing customers. Is it coming from greater penetration of various clouds, more seats, or pricing? Any color on if you're seeing accelerated pace of adoption of multiple clouds. Thanks.
Yeah, thank you for the question. Go back to what Mark said about a balanced portfolio. That is really what this is all about. Each of our individual clouds are best in class, and together, it's even more powerful, and it is a balanced portfolio. We're out there selling solutions to real business problems and opportunities for these customers. It's a very balanced portfolio. It's install-based selling, it's net new customers. I mentioned a few of these who are new customers to us. A company like PNC is a brand new logo, and it's a pretty good brand new logo, so we're super excited about it. It's just great execution with an excellent platform for our customers, whether it's install-based selling or net new logos and positioning the right solutions for growth.
Doris?
Yes. Our last question is from the line of Kirk Materne with Evercore ISI.
Thanks very much for fitting me in. Keith, you mentioned a couple of times in the presentation, just the breadth of your portfolio now, but you not only have a broad portfolio, but you guys have been verticalizing your go-to-market motion at the same time. Can you just talk to us about how differentiated it is to be able to not only take a broad product portfolio, but also shape it in a way that you can talk about how customer service transformation differs in, say, the financial services industry versus the telecommunications industry? To me, that seems like a massive moat that's very difficult to get over, and I know you guys have been working on it for a couple of years.
To me, that would seem to be one of the reasons maybe these bigger deals are happening at a faster cadence today versus, say, 1 to 2 years ago. Thanks.
As you know, this is one of our core strategies that we've tried to put in place over the last three and a half years, is really to speak the language of the customer and go to market by industry and make sure our messaging and our products and our entire portfolio is really, in many ways, taking this incredible platform of products and portfolio products and reoriented them to solve a specific customer problem. In this particular quarter, we're seeing something in Q3 around financial services where, again, seven of these premier financial services institutions decided to go with Salesforce as they think about their transformation. One of these deals was with a premier wealth management company, and they are going wall to wall with our Financial Services Cloud, which is one of our first vertical products that we've ever had in the company.
It's only been GA since March, but this firm is going wall to wall, and that's because we are targeting a specific problem area in a specific industry. You think about the Telecom Argentina solution that we partnered as part of our ecosystem with this company like Velocity. I mean, this is transformational for the telecommunications industry. It's a huge win for both of us. This is probably not the same sort of outcome that we would have gotten if we had not had something that was industry-specific. Whether it's the PNC story or the Citigroup story or the wealth management story that I referenced, or the Telecom Argentina, we are in very early days here, whether it's organically with our products, with Financial Services Cloud or the Health Cloud, or whether it's with our partner ecosystem.
This is really a hand-in-glove strategy with our partners, our SIs, our ISVs, the way that we've organized our field teams around going to market. At the end of the day, it all comes back to the platform because everything is built on that platform and leverages the strengths of that platform. Again, I think that is the secret sauce. This vertical and industry strategy is certainly playing off in terms of the level that we call on in the accounts. These are all very much CEO-level sales. The mind share and market share and wallet share that we're getting as a result of speaking the language of the customer. We've got some momentum here, and we're excited about it.
Yeah, we are excited, and we're going to tell you some more details about our strategy and our plans for the future because we're right here in New Jersey at CNBC headquarters, and we're about to walk into the studio with Jim Cramer. If you turn on CNBC, you're going to see us come in and talk to Jim.
Great. Thanks so much.
Thanks very much.
Yeah, thanks, everybody.
Bye now.
Ladies and gentlemen, this does conclude today's conference call. You may now disconnect.