After rallying over 50% in 2018, Salesforce.com's (CRM) - Get Report stock is seeing profit-taking after a fairly good, but imperfect, earnings report.

On Wednesday afternoon, the cloud CRM software giant reported July quarter (fiscal second quarter) revenue of $3.28 billion and non-GAAP EPS of $0.71. Revenue, officially up 27% annually and up 23% after backing out revenue from recently-acquired MuleSoft, topped a $3.23 billion consensus. Earnings per share officially beat a $0.47 consensus by $0.24; after backing out a $0.14 gain related to the accounting of "strategic investments," the beat amounted to $0.10.

For the October quarter, Salesforce is guiding for revenue of $3.355 billion to $3.365 billion (up 24% to 25%) and EPS of $0.49 to $0.50. The revenue outlook is favorable to a $3.355 billion consensus, but the EPS outlook is below a $0.53 consensus.

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On the other hand, with a $0.24 July quarter beat on the books, Salesforce is hiking its fiscal 2019 (ends in Jan. 2019) EPS guidance by $0.21 to a range of $2.50 to $2.52. And revenue guidance is being hiked by $50 million to a range of $13.125 billion to $13.175 billion (up 25% annually).

Shares fell 3.5% in premarket trading on Thursday. They're still up 56% over the last 12 months.

Here are some takeaways from Salesforce's earnings report and call.

1) Billings Growth was Healthy, But is Expected to Slow a Bit

Salesforce's closely-watched billings metric, which covers revenue plus the sequential change in the company's unearned revenue balance, rose 26% to $2.96 billion. That slightly topped a $2.94 billion consensus.

However, Salesforce is guiding for its unearned revenue balance growth to slow to around 20% in the October quarter from a July quarter level of 24%. When paired with the company's revenue guidance, that implies a billings growth outlook of around 18%. On the call, CFO Mark Hawkins attributed the unearned revenue growth slowdown to both "significant" currency headwinds (more on that shortly) and "the continued deepening of our quarter-on-quarter seasonality [for unearned revenue]."


Salesforce's July quarter results at a glance.

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2) Backlog Growth Remains Strong

Salesforce's "remaining performance obligation," which covers billed and unbilled future revenue it has under contract, totaled $21 billion at the end of July. After backing out a $200 million boost from the MuleSoft acquisition, that represents 35% growth.

Current remaining performance obligation, which covers future revenue under contract that's expected to be recognized during the next 12 months, grew 27% to $9.8 billion.

3) Sales Cloud Growth Slowed

Salesforce's age-old Sales Cloud platform, which is used by legions of salespeople to track leads and pursue deals, saw its revenue grow 13% to $1 billion. That's below the April quarter's 16% growth, and well below total organic revenue growth of 23%.

4) Other Key Businesses Grew Faster

Salesforce's Service Cloud (customer support/engagement software) platform saw revenue grow 27% to $892 million. Its Marketing Cloud and Commerce Cloud platforms collectively saw revenue rise 37% to $452 million. And excluding MuleSoft, "Salesforce Platform and Other" revenue, which includes revenue from the Heroku and Force.com cloud app development platforms, grew 32% to roughly $590 million.

As for MuleSoft, which provides tools for creating and managing application programming interfaces (APIs), its revenue grew 76% to $122 million. That's higher than Salesforce expected, something the company attributed to a large amount of license revenue being recognized. On the call, Salesforce execs once more talked up the ability of MuleSoft's platform to unlock data from third-party enterprise apps that could be leveraged by other Salesforce apps and help provide an end-to-end view of customers.

5) International Sales Growth was Solid

On a constant currency (CC) basis, Salesforce's EMEA and Asia-Pacific revenue grew 32% and 28%, respectively. With the regions still only accounting for 29% of Salesforce's revenue, the company still has quite a lot of headroom to take share overseas.

6) Currency Swings are Taking a Toll

Worth keeping in mind when looking at Salesforce's revenue, unearned revenue and backlog growth rates: The dollar's recent rally means that forex is no longer providing a top-line boost. Whereas dollar-based revenue growth was 3 percentage points higher than CC revenue growth in the April quarter, the growth rates were even in the July quarter.

Moreover, on the call, Hawkins forecast forex would act as a $75 million to $100 million headwind to revenue over the remainder of fiscal 2019. Needless to say, Salesforce would have issued a larger full-year revenue guidance hike if not for this.

7) Salesforce is Still Spending Aggressively

Operating expenses grew 27% on a GAAP basis to $2.32 billion, and 24% on a non-GAAP basis to $1.94 billion. As is the case for many other enterprise software firms, sales and marketing spend is easily Salesforce's largest expense: It accounted for 65% of last quarter's GAAP opex.

8) Free Cash Flow Continues to Rise

Like other software firms that are often paid for one or more years' worth of subscriptions up-front but recognize the revenue a quarter at a time, Salesforce's annual free cash flow (FCF) is much higher than its reported GAAP or non-GAAP earnings. Over the first six months of fiscal 2019, FCF totaled $1.63 billion, up from a year-ago level of $1.27 billion and well above non-GAAP net income of $1.11 billion.

Going into earnings, the analyst consensus was for full-year FCF to rise 17% in fiscal 2019 to $2.58 billion.