Salesforce’s third-quarter financial report showed a solid 14 per cent year-over-year increase in revenue, beating analysts’ expectations, but was overshadowed by the announcement that company co-CEO Bret Taylor will be stepping down.
The move will leave company founder Marc Benioff once again running the organisation as lone CEO.
Salesforce’s revenue growth, totalling US$7.8 billion for the quarter ending October 31, was largely driven by subscription and support revenue, which increased by 13 per cent year-on-year to $7.2 billion, while professional services and other revenues saw a 25 per cent increase over the same period, to US$604 million.
Earlier in November, the cloud-based CRM software maker announced it would cut about 950 jobs from its global workforce, facing pressure to cut costs since activist hedge fund Starboard Value took a stake in the company and immediately called for the company to increase its margins.
However, despite the strong third quarter performance, Salesforce’s share price fell more than nine per cent on 1 December trading, as much of the commentary from industry observers centred around Taylor’s resignation.
Speaking to analysts on a conference call after the results had been published, Benioff said “this quarter has been further proof of our commitment to profitable growth, continuing our operating margin growth, continued focus on our revenue growth, continued focus on our market share growth.”
It was on this same call that Benioff announced the news that Taylor had made the decision to step down from his role as co-CEO of Salesforce.
“While there is absolutely no easy time for a transition like this, I really do feel that now is the right time for me to return to my entrepreneurial roots, particularly given the technology landscape and the economy going through such tectonic shifts,” Taylor said.
He added that he would remain as co-CEO through the end of the fiscal year to ensure a smooth transition and a “a strong close to the quarter.”
Taylor first joined Salesforce in 2016 when the CRM software provider acquired his previous company, Quip, and has since held the position of president and chief operating officer at Salesforce prior to his promotion to co-CEO last year. He also played a key role in Salesforce’s $27 billion acquisition of Slack in 2020.
In addition to his role at Salesforce, Taylor was also chairman of the board at Twitter when Elon Musk tried to terminate his agreement to buy the social media platform for $44 billion. After publicly announcing Twitter would pursue legal action to enforce the purchase, Taylor lost his role as chairman when Musk eventually took over and immediately dissolved Twitter’s board.
This is not the first time that Salesforce a co-CEO has chosen to leave the company. In 2018, Benioff named Keith Block co-CEO and he remained in the position until he stepped down in 2020.
“Co-CEO arrangements are historically challenging long-term relationships, but it seems to be one which Marc seems to favour for succession planning as well as allowing him to pursue broader philanthropic interests,” said Jason Wong, VP analyst at Gartner.
He added that the co-CEO situation, which started with Keith Block, also allows Benioff to scale executive responsibilities, given the size and growth of Salesforce which now has several business units in MuleSoft, Tableau and Slack, all of which have their own CEOs.
“Marc is still very much committed to running Salesforce and has set several milestones, such as surpassing SAP as the largest enterprise applications vendor by revenue this past year and a target of $50B in annual revenue by 2026,” Wong said.
“I believe he would want to be at the helm as these milestones are achieved.” While it’s unlikely Benioff will announce Taylor’s successor in the immediate future, Wong said he would not be surprised to see another co-CEO appointment from within.