By Dan Gallagher 

The Curse of the Dow apparently takes some time to catch on.

Salesforce.com, named Monday as one of the blue-chip index's latest entrants, posted surprisingly strong results for its fiscal second quarter on Tuesday afternoon. Surprising because -- as one of the largest sellers of software to businesses -- Salesforce was seemingly well exposed to reports of corporate customers cutting back their tech budgets as they cope with the coronavirus pandemic.

But those cuts seemed to have spared the San Francisco-based cloud pioneer. Revenue for the period ended July 31 jumped 29% year over year to $5.15 billion. Billings, a measure of business transacted during the quarter that serves as a leading indicator for subscription-based cloud businesses, surged 34% to $4.75 billion -- well ahead of Wall Street's estimates. Salesforce also projected better-than-expected revenue for the fiscal third quarter and nudged up its forecast for the full fiscal year -- three months after trimming it back on worries about the pandemic's impact. Salesforce shares were up 14% in after-hours trading, having lagged behind many of its cloud peers so far this year.

Per its name, the company has long been a sales machine. In fact, it has only missed Wall Street's revenue targets once in the past five years, according to FactSet. But its inclusion in the Dow puts the company in a different light. With trailing 12-month revenue of just under $20 billion, Salesforce is the largest pure-play provider of cloud-based software. It will also be one of the smallest companies on the blue-chip index by trailing revenue -- ranking only above McDonald's. And it replaces oil titan Exxon Mobil.

Salesforce doesn't plan to be at that sales level for long. The company already speaks of hitting $30 billion in annual revenue, which Wall Street expects to happen by 2024. Salesforce also spoke Tuesday of the need to make a strategic shift to better position the company "in this new all-digital work-from-anywhere environment," which suggests the hyperacquisitive company may soon be shopping again. That could prove to be controversial for those who think Salesforce is becoming too addicted to big deals. But for now, the company's strong performance in a crippling pandemic will quiet a lot of critics.

Write to Dan Gallagher at dan.gallagher@wsj.com

 

(END) Dow Jones Newswires

August 26, 2020 06:14 ET (10:14 GMT)

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