For those of you who believe that size matters — and in the Cloud Wars, scale definitely makes a difference — Salesforce has surpassed SAP in most-recent quarterly revenue, but SAP tops Salesforce in trailing-12-month revenue.
Those two rivals are battling for third place in the enterprise-software market behind #1 Microsoft with its total for cloud and on-prem software being somewhere north of $70 billion, and #2 Oracle at about $50 billion.
But SAP and Salesforce are also scrapping to see which company can claim the mantle of world’s largest vendor of enterprise applications.
At the outset here, I want to emphasize that for the purposes of this comparison, I’m including both cloud and, for SAP, on-premises revenue because there are two separate prizes here: first, who’s the world’s largest vendor of enterprise apps, including both cloud and on-prem; and second, who’s the third-largest enterprise software company behind Microsoft and Oracle.
For SAP’s most-recent quarter, which ended June 30, total revenue was $8.16 billion. For Salesforce’s fiscal Q2, which ended July 31, revenue was $8.6 billion, giving a clear edge to Salesforce.
Beyond those most-recent quarterly numbers, I believe it’s reasonable to also analyze year-long totals because while seasonality is strong at both companies, it’s particularly outsized at SAP. If we look at the aggregate results for each company over the past four quarters, here’s what we see starting with most-recent results and moving backwards in time:
- SAP: Q2 $8.16 billion, Q1 $8.04 billion, Q4 $9.11 billion, Q3 $8.37 billion. That’s a trailing-12-month total of $33.78 billion, and you can see the huge bump SAP got in Q4.
- Salesforce (fiscal year runs Feb. 1 thru Jan. 31): $8.6 billion, $8.25 billion, $8.38 billion, $7.84 billion. That’s a trailing-12-month total of $33.07 billion, and you can see that Salesforce also had a nice uptick for its Q4 ended Jan. 31.
So across a full year’s time for the 12 months ended June 30 (SAP) and July 31 (Salesforce), SAP holds a clear lead over Salesforce: $33.78 billion to $33.07 billion. But as noted above when comparing the most-recent quarterly numbers, Salesforce comes out on top: $8.6 billion to $8.16 billion.
Salesforce CEO Marc Benioff pointed to that achievement in last week’s fiscal-Q2 earnings call, saying, “Our AI, data, CRM, plus Trust platform has propelled us to become the third-largest enterprise software company by revenue in the world.”
Nicely done. But can Benioff and Salesforce hold that ground against SAP?
Future Trends
And what might the future hold for this head-to-head competition? One primary factor to explore is the guidance offered by each company regarding its expected growth for the next couple of quarters. Taking those forecasts into account, we can expect SAP to extend its long-term lead over Salesforce while also becoming the short-term leader because its cloud business has been growing much faster than that of Salesforce and is projected to continue to do so.
In the quarterly investor presentation Salesforce released last week with its Q2 numbers, the company said its guidance for total revenue for FY24, which ends on Jan. 31 of 2024, is $34.7 billion to $34.8 billion (see chart below, which is slide #6 on the presentation).
(Source: Salesforce Q2 FY24 Quarterly Investor Deck, Slide 6)
Meanwhile, SAP expects its fast-growing cloud revenue to increase by 23% to 24% in calendar 2023 to a total of $15.12 billion to $15.34 billion (see page 6 of the Business Outlook section in SAP’s Q2 earnings release). That means SAP’s cloud business is expected to grow more than twice as rapidly as Salesforce’s this year, so the deciding factor in SAP’s ability to hold its lead as the #1 apps vendor over the long term will be how rapidly its on-prem licensing business slips as customers convert over to the cloud.
Final Thought
I’m betting that SAP will emerge over the next few quarters as not only the #1 apps vendor on a quarter-by-quarter basis but also on a trailing-12-month scale because its cloud momentum is significant and broad-based, whereas Benioff has steadfastly refused to give any reason to believe Salesforce’s cloud business can grow beyond 11%.
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