The enterprise cloud giant Salesforce (CRM) is set to report third quarter fiscal 2021 earnings results after the closing bell Tuesday. Its shares of have been one of the more popular components on the Dow Jones Industrial Average, rising 30% year to date, besting the 25% rise in the S&P 500 index.

The customer relationship management specialist is benefiting from strong tailwinds from digital transition as companies strive to get closer to the consumer and optimize operations. The company’s four major business segments are each growing strongly: Sales Cloud, Service Cloud, Platform and Marketing & Commerce Cloud. The latter has been the main driver of Salesforce’s subscription growth and its revenue stream. The CRM platform which offers business intelligence insights also allows companies the ability to centralize data and personalize customer service.

And with hybrid work becoming a part of the new normal, this increases an emphasis on collaboration software which is becoming more of an important enterprise tool. Salesforce has steadily grown its market shares in these end markets. Among the many growth catalyst, not only are Salesforce’s billings and booking metrics should reflect improving demand trends, the company is poised to realize stronger profit margins in the quarters ahead. But for the stock to keep rising, Salesforce on Tuesday will need to report strong billings and booking metrics, combined with upside guidance.

For the three months that ended October, Wall Street expects the San Francisco-based company to earn 92 cents per share on revenue of $6.8 billion. This compares to the year-ago quarter earnings of $1.74 per share on revenue of $5.42 billion. For the full year, which ended in January, earnings are projected to decline 10% year over year to $4.43 per share, while revenue of $26.33 billion would rise 24% year over year.

Continued strong demand in corporate digital transformation is poised to drive Salesforce’s Q3 revenue results, particularly with products like Trailhead and myTrailhead which — through revolutionary technology — enable companies to increase business scale. And this is likely to have driven increased subscriber growth during the quarters. The company’s ability to meet complex business problems has been the key differentiating factor, despite the emergence of competitive threats from the likes of Workday (WDAY), Snowflake (SNOW), among others.

The company has also also benefited from timely acquisitions such as its $27.7 billion deal for Slack, as well as strategic deals Mobify and Vlocity which expected to have boosted revenue for the just-ended quarter. These deals are aimed at helping the company to realize its vision to “define the future of enterprise software” by helping businesses create digital headquarters that will improve their employees’ ability to work remotely. So far, its recents results suggests it has begun to do just that.

In the second quarter, Salesforce beat on both the top and bottom lines, while raising full-year revenue outlook. Q2 revenue rose 24% year over year to $6.34 billion, topping consensus estimates by $90 million, while adjusted earnings of $1.48 per share came in 55 cents better than analysts expected. For Q3, the company forecasted revenue range of $6.78 billion to $6.79 billion, above the $6.66 billion consensus, with EPS of 91 cents to 92 cents, more than 10 cents better than consensus.

Given the strong momentum Salesforce has enjoyed in its core business, on Tuesday it will need to guide in a manner that suggest there is no signs of slowing down. The question is, will the stock respond in a way that assumes all of this good news? That is what investors will be watching.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Source: Nasdaq

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