Summary
Salesforce closed FY2021 Q2 with revenue of $5.15 billion, up 28.9% from the prior-year quarter. Year-to-date revenue reached $10.02 billion, up 29.5% from the first six months of FY2020. The company said new business grew in the quarter at rates consistent with historical trends before COVID-19, after a first quarter that had shown a decline in new business. The quarter also included the June 1, 2020 close of the Vlocity acquisition for a US GAAP purchase price consideration of $1.4 billion. Subscription and support remained the largest revenue source, but the total top line carried the quarter.
Profitability looked strong on the surface. Gross profit was $3.84 billion, up 26.7% from the prior-year quarter. Gross margin was 74.5%, down from a year earlier as service delivery costs and amortization of purchased intangibles rose. Operating income was $178 million in the quarter, up 206.9% from the prior-year quarter. Operating margin was 3.5%, up 2.0 percentage points from the prior-year quarter. The year-to-date operating income picture was much weaker: operating income was $38 million, down 85.8% from the first six months of FY2020. Net income was $2.625 billion in the quarter, up 2784.6% from the prior-year quarter, and diluted EPS was $2.85, up 2490.9%. Those GAAP results included a one-time discrete tax benefit from an international corporate structure change and mark-to-market gains on strategic investments, so the profit surge did not reflect operating trends alone. Year-to-date net income was $2.724 billion, up 464.0%, and year-to-date diluted EPS was $2.96, up 385.2%.
Cash generation was softer. Operating cash flow was $429 million in the quarter, down 1.6% from the prior-year quarter. Year-to-date operating cash flow was $2.288 billion, down 4.7% from the first six months of FY2020. Capital expenditures were $114 million in the quarter, down 36.0% from the prior-year quarter. Management blamed payment delays from customers affected by COVID-19, changes in billing frequency for new business, and investments in go-to-market efforts. Deferred revenue, current portion, was $8.711 billion, up 22.0% from the prior-year quarter. Total remaining performance obligation was $30.6 billion, up 20.9% from a year earlier. Current remaining performance obligation was approximately $15.2 billion, up 26% year over year, or 24% in constant currency.
Guidance points to decelerating revenue growth. For Q3 FY2021, Salesforce guided revenue of $5.24 billion to $5.25 billion, up about 16% year over year. For the full FY2021, the company raised revenue guidance to $20.7 billion to $20.8 billion, up about 21% to 22% year over year. Non-GAAP diluted EPS guidance was $0.73 to $0.74 for Q3 FY2021 and $3.72 to $3.74 for the full FY2021. Full-year operating cash flow growth guidance was 12% to 13%, while Q3 current remaining performance obligation growth guidance was 19%. Management said the guidance assumes no change to the value of the strategic investment portfolio from ASU 2016-01. The company said it expects modest growth in new incremental business and renewals, total revenues, RPO and operating cash flows for the remainder of fiscal 2021. It also expects an increase in expenses during the remainder of fiscal 2021 as it redirects resources and invests in go-to-market and product efforts. Risks include the ongoing COVID-19 pandemic, payment delays, billing frequency changes, increased go-to-market and product investments, foreign currency fluctuations, and possible customer attrition. The company also warned that its effective tax rate can fluctuate because of discrete tax items, acquisitions, or changes to its operating structure. Attrition, excluding Integration Cloud, Salesforce.org and Tableau, was less than ten percent as of July 31, 2020.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $5.15B | $4.87B | +5.9% | $4.00B | +28.9% |
| Gross profit | $3.84B | $3.61B | +6.3% | $3.03B | +26.7% |
| Gross margin | 74.5% | 74.2% | +0.3 pp | 75.8% | -1.3 pp |
| Research & development | $898.0M | $859.0M | +4.5% | $607.0M | +47.9% |
| Sales & marketing | $2.27B | $2.39B | -4.8% | $1.82B | +24.7% |
| General & administrative | $489.0M | $502.0M | -2.6% | $375.0M | +30.4% |
| Total operating expenses | $3.66B | $3.75B | -2.4% | $2.97B | +23.2% |
| Operating income (loss) | $178.0M | -$140.0M | +227.1% | $58.0M | +206.9% |
| Operating margin | 3.5% | -2.9% | +6.3 pp | 1.4% | +2.0 pp |
| Net income (loss) | $2.63B | $99.0M | +2551.5% | $91.0M | +2784.6% |
| Net margin | 51.0% | 2.0% | +48.9 pp | 2.3% | +48.7 pp |
| Diluted EPS | $2.85 | $0.11 | +$2.74 | $0.11 | +$2.74 |
Risks
The COVID-19 pandemic and related public health measures have materially affected how we and our customers operate, and have materially affected our operating results and cash flows. In the second quarter of fiscal 2021, new business grew at rates consistent with historical trends prior to COVID-19, but payment delays from customers continued, and we expect modest growth in new incremental business, renewals, total revenues, RPO and operating cash flows for the remainder of fiscal 2021.
COVID-19 has affected customer IT spending, delayed prospective customers' purchasing decisions, and reduced the value or duration of subscription contracts. In the second quarter of fiscal 2021, payment delays from some customers continued, and together with changes in billing frequency, negatively impacted operating cash flows, which decreased 1.6% year-over-year to $429.0 million.
Evolving data privacy laws such as GDPR and CCPA impose new obligations on us and our customers. On July 16, 2020, the Court of Justice of the European Union invalidated the EU-US Privacy Shield Framework, one mechanism we relied on to transfer personal data from the European Economic Area to the United States. Depending on how the decision is enforced, the cost and complexity of providing our services in certain markets may increase.
As of July 31, 2020, our attrition rate, excluding Integration Cloud, Salesforce.org and Tableau, was less than ten percent, but it may increase over time, including as a result of COVID-19. Consistent attrition rates play a role in our ability to maintain growth in subscription and support revenues.
Our results of operations can be significantly impacted by gains and losses on strategic investments. Our net income for the second quarter of fiscal 2021 was $2.625 billion, up 2784.6% year-over-year, and included gains on strategic investments, net, which are recorded through the statement of operations and may cause volatility.
Our effective tax rate may fluctuate due to changes in domestic and foreign earnings or material discrete tax items. In the second quarter of fiscal 2021, we recorded a one-time discrete tax benefit from the recognition of deferred tax assets related to an intra-entity transfer of intangible property.
We experience significant competition in talent recruitment and retention, and difficulty in hiring may be amplified by evolving restrictions on immigration, travel, or availability of visas, including restrictions imposed in response to COVID-19. Our headcount increased 38 percent since July 31, 2019, and failure to attract or retain personnel could harm our business.
We completed the acquisition of Vlocity in June 2020 for $1.4 billion and previously acquired Tableau in August 2019. Integrating acquisitions involves risks, including potential failure to achieve expected benefits, difficulties in integrating acquired technologies and personnel, and disruption to our business.
The market for enterprise applications and platform services is intensely competitive and rapidly evolving. We face competition from AI solutions from new startups and established companies, and competitors may have greater resources, name recognition, or more agile responses to customer demands.
SaaS KPIs
All quarters →Free cash flow
Billings and other
Current Remaining Performance Obligation
Remaining Performance Obligation
Attrition Rate
Summary, forecast, risks and KPIs are extracted from Salesforce, Inc.'s SEC filings for Q2 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.