For Salesforce, It's Beat, Raise, Repeat

Salesforce reported solid second-quarter results that came in ahead of our expectations. Revenue grew 26% in the quarter, driven by strong growth in each of the company's cloud segments. Most impressively, Sales Cloud, the company's oldest and largest segment, grew 17%, well ahead of last year's pace, and outpacing our expectations as well.

Service Cloud continues to make inroads in customer service organizations within Enterprise customers, but Marketing Cloud continues to exceed our expectations by the largest magnitude, growing 56% year over year, and 36% organically. We think the Demandware and Krux acquisitions from last year are bolstering the segment and opening up new channels in the B2C (business to consumer) and retail segments as well. We raised our fair value estimate from $103.00 previously, to $109.00, and even though the stock is rallying this morning on the back of these results, we think the stock looks undervalued relative to our fair value estimate.