Three big-time enterprise vendors serving very different parts of the market all reported that customer spending strengthened in their most-recent quarters and posted compelling numbers to support that story of revival.
Let’s take a look at some key fiscal-Q3 results and/or commentary released last week by each company for the three months ended Oct. 31.
Here are the key numbers from my analysis last week headlined “Workday’s Big 3: Co-CEO Eschenbach Cites Top 3 Customer Priorities“:
In response to the strong customer demand Workday is seeing across those and other areas, Workday raised its fiscal 2024 subscription-revenue guidance to $6.598 billion, which represents growth of 19% for the fiscal year ending Jan. 31, 2024.
So that means Workday’s put together, under Eschenbach’s leadership, three straight strong quarters; it’s boosting expectations for its fiscal Q4; its forward-looking “total subscription-revenue backlog” jumped 32% last quarter and 31% in this most-recent quarter; and the company has carved out a unique and highly strategic position in the wickedly competitive Cloud Wars.
I think we can expect more of the same in 2024 as Eschenbach will take over as sole CEO in early February at the end of Workday’s fiscal year, with cofounder and current co-CEO Aneel Bhusri very happily transitioning to executive chairman. Investors certainly believe Workday’s best days are ahead of it as the company’s share price has doubled in the past 13 months, with its current market cap of $71 billion nearing Workday’s all-time high.
Revenue for the quarter jumped 34% to $698.5 million, with CEO Frank Slootman saying the company is sitting at the strategic intersection of data and artificial intelligence (AI). “Snowflake makes the common AI use cases easy and the advanced use cases possible,” Slootman said on the company’s Q3 earnings call last week. “We’re well positioned for AI based on the scale and scope of our data cloud programmability and governance framework.”
Later in the call, Slootman doubled down on his belief that Snowflake is in a great position to capitalize on the generative AI (GenAI) Revolution that will surely intensify in 2024. “We’re already seeing that the interest in AI is also driving interest in the data strategy, which then has a knock-on effect on consumption. It’s also the expansion of the data universe that people are bringing in the quality of the data initiatives. All of that is going to bring incremental workload utilization to Snowflake even though you would normally not necessarily characterize that as AI,” Slootman said.
“And it might well be that a ton of these workloads is actually the proverbial iceberg and only the tip of it that’s sticking above the water is really AI. But everything that has to happen to support us is happening below the surface, and then we’re going to be a huge beneficiary of that (emphasis mine).
“We think that Snowflake is super well-prepared because our data estates are in a very advanced state because our customers have spent years and years and years and, in some cases, literally, decades — from prior legacy platforms to building these estates and curating the data and organizing and optimizing for the data to be completely trusted and sanctioned in their environments. And that is a huge value when you start tackling AI and ML [machine learning] models.”
Snowflake CFO Mike Scarpelli, noting that Snowflake is raising full-year guidance to $2.65 billion, representing 37% year-over-year growth, offered this perspective on more-bullish behavior from customers: “Consumption trends have improved and we are seeing stability in customer-expansion patterns.”
Now, on this one, there’s good news in here — I promise — but with CEO Marc Benioff now entering the second year of his unconditional focus on boosting margins, the Salesforce CEO is employing the full range of his stellar story-telling abilities to crank up the excitement and anticipation while simultaneously insisting there’s nothing to be excited about. Check out this exchange from the company’s Nov. 30 earnings call:
Analyst question: “Marc, really nice improvement in deals over $1 million, up 80% year over year. You’ve all alluded to this larger contract you landed. I’m just curious, do you feel like this is a new environment?”
Benioff response: “There was a lot of debate among the management team in putting together this call on how we were going to answer that question. We don’t want to give you, in any way, indications that we see this environment going behind us” (emphasis mine). “That said, we see a lot of green shoots. There’s just a lot of opportunities. Customers are excited about — and Japan is very much a metaphor for me. When I was there about one year ago, it was for them still the pandemic. When I had lunch with employees a year ago, everyone was wearing masks. So this was the first time when I felt like, okay, it’s kind of back to normal and the pandemic hangover has kind of been digested by the customers.”
Okey-dokey: so “we don’t want to give you, in any way, indications” that things are getting better, Benioff intones, but at the same time green shoots are shooting up everywhere and “customers are excited” and “there’s just lots of opportunities” and “it’s kind of back to normal.” If you can decipher that rhetorical Gordian knot, please let me know.
Meanwhile, the company said revenue was up 11% to $8.7 billion, which means Benioff and Salesforce remain the world’s largest enterprise-apps company, topping SAP’s Q3 total of $8.52 billion.
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