Summary
Salesforce reported total revenue of $4.86 billion for the first quarter of fiscal 2021, up 30.2% year over year and 31% in constant currency. Management attributed the gain to volume-driven new business, including new customers, upgrades and additional subscriptions from existing customers, plus acquisition activity. Incremental new business tracked historical trends and seasonality through roughly the first half of the quarter. From the second half of March, as COVID-19 became a global crisis, new business came in below the prior year. Average contract duration on incremental new business and renewals ran about three months shorter than historical averages. That mix matters because the model bills ahead, and shorter contracts cut both billings and backlog.
Profitability told a different story. Gross profit rose 27.9% to $3.61 billion, while gross margin slipped to 74.2%, down 1.3 percentage points. Operating results swung to a loss of $140 million, and operating margin fell to -2.9%, down 8.5 percentage points. Net income fell 74.7% to $99 million, and diluted earnings per share fell 77.6% to $0.11. Non-GAAP diluted earnings per share, which strips out stock-based expense and amortization of purchased intangibles, was $0.70. Gains on the strategic investment portfolio lifted the GAAP result, and mark-to-market accounting on those holdings stays a swing factor that the company does not forecast.
Three COVID-19 decisions shaped the expense line. Salesforce gave its direct sales force a one-time partial minimum commission guarantee worth about $140 million and expensed it immediately. Cancelling in-person events, including Dreamforce, accelerated roughly $65 million of costs into the quarter. Working from home and the halt in business travel delivered a net benefit of about $75 million to operating expenses, partly offset by a $25 million impairment of operating lease right-of-use assets and more than $20 million of donations and relief. Headcount ended the quarter at 51,613, up from 37,485 a year earlier and up 36% since April 30, 2019. The cost base keeps growing even as bookings slow.
Cash generation held up. Operating cash flow was $1.86 billion for the quarter, down 5.4% year over year. Management pointed to temporary payment flexibility granted to distressed customers and to the commission guarantee, which had no matching customer receipts. Capital expenditures rose 103.1% to $323 million, including about $150 million for the 450 Mission St. property in San Francisco. Free cash flow, a non-GAAP measure, was $1,536 million. Cash, cash equivalents and marketable securities ended the quarter at $9.80 billion. Deferred revenue, current portion only, rose 20.1% to $9.11 billion. Total remaining performance obligations reached $29.30 billion, up 17.7%, and current remaining performance obligations were about $14.5 billion, up 23% and 24% in constant currency.
Guidance for the second quarter of fiscal 2021 calls for revenue growth of approximately 22% to 23% year over year, a GAAP loss per share of $0.02 to $0.01, non-GAAP earnings per share of $0.66 to $0.67 and current remaining performance obligation growth of 16% to 17%. For the full fiscal year, management guides to revenue growth of approximately 17%, a GAAP loss per share of $0.06 to $0.04, non-GAAP earnings per share of $2.93 to $2.95 and operating cash flow growth of 10% to 11%. The full-year numbers lower the outlook the company first gave on February 25, 2020. The company also expects a GAAP tax provision of approximately 81% for the three months ending July 31, 2020 and approximately 104% for the year ending January 31, 2021.
Risks center on how long the downturn lasts. Attrition, excluding Integration Cloud, Salesforce.org and Tableau, was less than nine percent as of April 30, 2020, and management warned it could rise. Software license revenue, roughly five percent of subscription and support revenue, was hurt by lower new business and shorter contracts. Foreign currency movements cut revenue outside the Americas by about $34 million. Because subscription revenue is recognized ratably, the pandemic may not fully show up in results until later quarters. Salesforce also closed the acquisition of Vlocity in June 2020 for about $1.2 billion, which adds integration work and expense to an already uncertain year.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $4.87B | $4.85B | +0.3% | $3.74B | +30.2% |
| Gross profit | $3.61B | $3.63B | -0.6% | $2.82B | +27.9% |
| Gross margin | 74.2% | 74.8% | -0.6 pp | 75.5% | -1.3 pp |
| Research & development | $859.0M | $831.0M | +3.4% | $554.0M | +55.1% |
| Sales & marketing | $2.39B | $2.35B | +1.9% | $1.70B | +40.8% |
| General & administrative | $502.0M | $490.0M | +2.4% | $362.0M | +38.7% |
| Total operating expenses | $3.75B | $3.67B | +2.3% | $2.61B | +43.6% |
| Operating income (loss) | -$140.0M | -$36.0M | -288.9% | $210.0M | -166.7% |
| Operating margin | -2.9% | -0.7% | -2.1 pp | 5.6% | -8.5 pp |
| Net income (loss) | $99.0M | -$248.0M | +139.9% | $392.0M | -74.7% |
| Net margin | 2.0% | -5.1% | +7.1 pp | 10.5% | -8.5 pp |
| Diluted EPS | $0.11 | -$0.29 | +$0.40 | $0.49 | -$0.38 |
Risks
The COVID-19 pandemic materially affected how Salesforce and its customers operate and its operating results. MD&A states Salesforce expects fiscal 2021 business to grow at rates lower than planned before the pandemic, with slower growth in new incremental business, total revenues, RPO and operating cash flows; FY2021 Q1 operating cash flow decreased 5.4% year-over-year to $1.86B.
Since the second half of March 2020, Salesforce experienced a decline in new business versus the prior-year period as customers delayed or reduced purchasing decisions due to COVID-19. Average contract duration for incremental new business and renewals was approximately three months shorter than historical averages, which negatively impacted upfront software license revenue and could reduce future revenue and RPO.
COVID-19 affected some customers' willingness or ability to pay. Salesforce provided temporary financial flexibility such as payment delays, which negatively impacted operating cash flow, and MD&A warns of increasing credit loss risks from accounts receivable depending on the duration or degree of the economic slowdown.
Fair value adjustments on publicly and privately held equity investments flow through the statement of operations. COVID-19 contributed to approximately $77 million of impairment charges in the strategic investment portfolio in FY2021 Q1, and impairment costs increased $49 million versus the prior-year period; continued market volatility could materially affect results.
The shift to a global work-from-home operating environment due to COVID-19 could adversely affect Salesforce's security measures and its ability to address and respond to incidents quickly. Salesforce is regularly targeted by malicious cyber-attack attempts, and a breach could harm reputation, future sales and result in legal and financial liability.
Salesforce temporarily closed all offices globally. The work-from-home environment caused strain for and adversely impacted productivity of certain employees, and reopening offices may expose personnel to health risks and add financial burdens. Hiring and retention difficulties may be amplified by immigration, travel or visa restrictions tied to COVID-19.
Salesforce cancelled or shifted in-person customer and industry events, including Dreamforce, World Tours, Connections, Basecamps and Higher Ed Summit, to virtual-only experiences. Virtual events may not generate the same customer interest, opportunities and leads, and event changes accelerated approximately $65 million of expenses in FY2021 Q1.
Data privacy laws such as the CCPA, which took effect in January 2020, and the GDPR impose obligations on Salesforce as both data controller and data processor. Cross-border transfer limits, local data residency rules and COVID-19-related data processing concerns may increase compliance burdens, fines or liability.
The enterprise applications and platform services market is intensely competitive, and Salesforce may be required to continuously enhance its artificial intelligence offerings to provide quality recommendations. New offerings such as Analytics, Integration and COVID-19-response products like Work.com may not succeed or generate significant revenue.
SaaS KPIs
All quarters →Free cash flow
Billings and other
Current Remaining Performance Obligation
Remaining Performance Obligation
Summary, forecast, risks and KPIs are extracted from Salesforce, Inc.'s SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.