Summary
Salesforce closed FY2022 Q2 with revenue of $6.34 billion, up 23.1% from the prior-year quarter. Gross profit reached $4.73 billion, up 23.1%, and operating income rose 86.5% to $332 million. Operating margin was 5.2%, up 1.8 percentage points, while gross margin held at 74.6%, flat versus the prior-year quarter. Net income told a different story. It fell 79.6% to $535 million, and diluted EPS dropped 80.4% to $0.56. The prior-year quarter included a large one-time discrete tax benefit that makes the year-over-year comparison difficult. On a year-to-date basis, revenue was $12.30 billion, up 22.8%, and operating income was $686 million, up 1,705.3%. Year-to-date net income was $1.00 billion, down 63.1%, and year-to-date diluted EPS was $1.06, down 64.2%. Year-to-date operating margin was 5.6%, up 5.2 percentage points, and year-to-date gross margin was 74.3%, down 0.1 percentage points.
Cash generation was mixed. Operating cash flow in the quarter was $386 million, down 10.0% year over year. Year-to-date operating cash flow was $3.61 billion, up 58.0%. Capital expenditures rose 86.8% to $213 million in the quarter. Free cash flow, a non-GAAP measure, was $173 million in the quarter. Deferred revenue ended the quarter at $11.07 billion, up 27.0%. Remaining performance obligation was $36.2 billion, up 18.3%. Current remaining performance obligation was $18.7 billion, up 23% year over year, and included about $800 million from Slack. Foreign currency fluctuations benefited revenue by approximately 2% in the quarter. The company's full-time equivalent headcount was 65,595, including 2,814 from Slack.
Management guided for continued growth. For the next quarter, Q3 FY22, revenue guidance is $6.78 billion to $6.79 billion, up approximately 25% year over year. For the full fiscal year FY22, revenue guidance was raised to $26.2 billion to $26.3 billion, or 23% to 24% growth. Full-year revenue guidance includes roughly $530 million from Slack, net of purchase accounting. The company also guided full-year GAAP operating margin to approximately 1.8% and non-GAAP operating margin to approximately 18.5%. Q3 GAAP EPS guidance is a loss of $0.06 to $0.05, while full-year FY22 GAAP EPS guidance is $0.81 to $0.83. Non-GAAP EPS guidance is $0.91 to $0.92 for Q3 and $4.36 to $4.38 for the full year. Full-year operating cash flow growth is expected at 14% to 15%, and Q3 current RPO growth is guided to 22%. In the reported quarter, non-GAAP operating margin was 20.4% and non-GAAP diluted EPS was $1.48.
The Slack acquisition closed on July 21, 2021 for approximately $27.1 billion, including $15.8 billion in cash and 46 million shares of Salesforce stock. Integration is a key execution risk, and the company assumed Slack convertible notes that it expects to settle in cash in the next quarter. Salesforce also faces ongoing COVID-19 uncertainty, including the delta variant, which could affect customer demand and sales cycles. Attrition was between 8.0 and 8.5 percent, and management expects it to remain consistent for the rest of fiscal 2022. Interest expense increased after the company issued $8.0 billion of Senior Notes in July 2021. Management noted that Q3 has historically been its smallest operating cash flow quarter, a seasonal pattern investors should watch.
The quarter showed strong top-line momentum but also margin pressure from expenses and acquisition integration. Operating income improved, yet net income and EPS declined sharply because of the prior-year tax benefit. Salesforce continues to invest in growth, as seen in the 86.8% rise in capital expenditures and the Slack deal. The company's guidance points to double-digit revenue growth for the full year, but it also embeds a GAAP loss for the next quarter. Investors will need to weigh the backlog growth and raised outlook against integration risks, COVID-19 uncertainty, and the seasonal cash flow pattern.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $6.34B | $5.96B | +6.3% | $5.15B | +23.1% |
| Gross profit | $4.73B | $4.41B | +7.2% | $3.84B | +23.1% |
| Gross margin | 74.6% | 73.9% | +0.6 pp | 74.5% | +0.0 pp |
| Research & development | $1.02B | $951.0M | +7.3% | $898.0M | +13.6% |
| Sales & marketing | $2.74B | $2.54B | +7.5% | $2.27B | +20.3% |
| General & administrative | $639.0M | $559.0M | +14.3% | $489.0M | +30.7% |
| Total operating expenses | $4.39B | $4.05B | +8.4% | $3.66B | +20.0% |
| Operating income (loss) | $332.0M | $354.0M | -6.2% | $178.0M | +86.5% |
| Operating margin | 5.2% | 5.9% | -0.7 pp | 3.5% | +1.8 pp |
| Net income (loss) | $535.0M | $469.0M | +14.1% | $2.63B | -79.6% |
| Net margin | 8.4% | 7.9% | +0.6 pp | 51.0% | -42.5 pp |
| Diluted EPS | $0.56 | $0.50 | +$0.06 | $2.85 | -$2.29 |
Risks
The July 2021 Slack acquisition was the largest to date, at approximately $27.1 billion including $15.8 billion cash and 46 million shares, and Salesforce assumed $1.3 billion of Slack convertible notes. Risk factors and MD&A highlight that benefits and product integration may take longer than expected or not be realized, disrupting operations and pressuring results.
Outstanding debt principal due rose to $11.551 billion as of July 31, 2021 from $2.690 billion as of January 31, 2021, after the July 2021 issuance of $8.0 billion of Senior Notes increased interest expense. Debt service, covenants, and potential refinancing constraints could limit financial flexibility.
As Salesforce targets larger enterprise and governmental customers, sales cycles become more time-consuming and expensive, with pricing pressure and implementation challenges. MD&A notes longer and less predictable sales cycles and more variation from forecasted new business activity due to an expanded product mix and enterprise solution selling.
Periodic changes to the sales organization have in some periods reduced productivity and could negatively impact growth in current and future quarters, including revenue. MD&A states the company periodically makes such changes to position for long-term growth, which has in the past and could again temporarily disrupt sales productivity.
Success depends on key management, including the CEO, and on development and operations personnel, with significant competition for engineers, sales executives, and data scientists. The February 2021 retirement of President and CFO Mark Hawkins and the planned flexible office model may affect retention and execution.
Evolving privacy and cross-border data transfer rules, including GDPR, CCPA, and newer state laws, plus the CJEU invalidating the EU-US Privacy Shield, may require additional changes, restrict data transfers, and increase compliance costs and liability. The risk factor states these laws may reduce demand and require more onerous contract obligations.
Salesforce is increasingly building AI into offerings, including Customer 360, which presents ethical, privacy, and reputational risks. If AI solutions draw controversy or data practices impair acceptance, the company may experience brand harm, competitive harm, or legal liability.
The company holds strategic investments in publicly traded and privately held companies, and fair value adjustments flow through the statement of operations. Partial or total loss of invested capital and concentration in a small number of investees could materially affect financial results.
Customers have no obligation to renew subscriptions and may renew for fewer subscriptions, shorter contract lengths, or lower-cost offerings. Attrition was between 8.0 and 8.5 percent as of July 31, 2021, excluding certain offerings, and may increase over time, including due to COVID-19.
The COVID-19 pandemic and variants, including the delta variant surge, continue to create uncertainty. MD&A says return-to-work strategy may require additional investments, position eliminations, and real estate impairments, while weakened global economic conditions could affect customer spending, attrition, and sales cycles.
SaaS KPIs
All quarters →Free cash flow
Non-GAAP operating margin
Billings and other
Current Remaining Performance Obligation
Remaining Performance Obligation
Summary, forecast, risks and KPIs are extracted from Salesforce, Inc.'s SEC filings for Q2 FY2022 (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.