Welcome to the Salesforce's Fiscal 2022 Second Quarter Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would like to hand over the conference to your speaker, Mr. Evan Goldstein, Senior Vice President of Investor Relations. Sir, you may begin.

Evan Goldstein - Senior Vice President, Investor Relations

Thank you, Mel. Hello, everyone, and thanks for joining us for our fiscal '22 second quarter conference call. I'm Evan Goldstein, Senior Vice President of Investor Relations. Our results press release, SEC filings, and a replay of today's call can be found on our IR website at www.salesforce.com/investor. With me on the call today is Marc Benioff, Chairman and CEO; Amy Weaver, Chief Financial Officer; Bret Taylor, Chief Operating Officer; and Gavin Patterson, Chief Revenue Officer.

As a reminder, our commentary today will primarily be in non-GAAP terms. Reconciliations between our GAAP and non-GAAP results and guidance can be found in our earnings press release. Some of our comments today may contain forward-looking statements that are subject to risks, uncertainties, and assumptions. In particular, our expectations around the impact of COVID-19 pandemic on our business, acquisition, results of operations, and financial conditions, and that of our customers and partners are uncertain and subject to change.

Should any of these materialize or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements. A description of these risks, uncertainties, and assumptions and other factors that could affect our financial results is included in our SEC filings including our most recent report on Form 10-K.

With that, let me hand the call to Marc.

Marc Benioff - Chair & Chief Executive Officer

Well, thank you, Evan. Appreciate it. And thanks, everyone, for being on the call today. I am actually here in Geneva, Switzerland, with Gavin Patterson, our Chief Revenue Officer, and I'm attending the World Economic Forum's IBC meeting and board of trustees meeting, and it's been a great experience being here in Geneva. Very much the world is open for business here, and it's great to be meeting with our customers face to face and in person and discussing our business with them and talking about their businesses and how their businesses are doing in this new normal. And we're learning quite a bit about how different the U.S. is from Europe right now and also how much has really changed, which is quite a bit.

So I'm absolutely excited to be here, but I'm also extremely excited to share our phenomenal second quarter results with you. You can really see we had a phenomenal second quarter. We just had a phenomenal second half you're about to hear. We're about to have a phenomenal first half as well. And we're also going to have a good chat about what we're doing with Slack. Very exciting acquisition that's now closed and you are going to hear about the number one CRM just got better. And it's incredible what's going on with Slack and looking forward to addressing all that within the script with you. So, look, we are in a new world. There's no doubt about that.

I'm sure that all of us realize that, and we are delivering success from anywhere as well for Salesforce. We've gone through a tremendous transformation and we're now delivering this new world for our stakeholders. And from a business perspective, well, I'd say it's been an absolutely extraordinary 18 months for Salesforce. I know for all of you and certainly for all the CEOs I met with today, we're navigating this global pandemic. We have been guided by our core values of trust, of customer success, of innovation, equality. But through all this and through our perseverance and through our, I think dedication to our customers, we've been able to deliver record financial results.

And with these results, we now can say in looking over this we've now had five outstanding quarters in a row, really delivering the success from anywhere vision. Pretty awesome. So let's take a look now in the second quarter, because the numbers are incredible. And you can see we delivered our first $6 billion quarter, about $6.3 billion, and continue to maintain our very strong growth rate. Our profitability, our cash flow, our margin growth - continue to execute our new operating margin model. And you can see right now revenue to growth in the quarter you can see $6.34 billion, up 23% year-over-year, pretty awesome. And above where we thought we were going to be, considerably above.

And I guess I'm as excited as I am about the revenue, I'm also very excited that as we're executing this new operating margin model, we can see the margin in the quarter was also very healthy, 20.4%, up 20 basis points year-over-year and also delivered $386 million in operating cash flow. For fiscal year 2022, we are raising again our guide to $26.3 billion, which is now at the high end of our range. It's a raise of $300 million. And it's going to represent about 24% projected growth year-over-year and just really reflects I think how well the company is doing in its core and not just through the Slack acquisition but you can see organically especially when you look at the numbers over the last five quarters.

And we're raising our operating margin to 18.5%, up 80 basis points year-over-year. Again, based on just the outstanding performance of the company, we're able to do some amazing things here with the operating margin. I don't think Salesforce has really had better execution, better management team, greater momentum, and as I have spoken to so many customers today, I don't think we've ever been more well-positioned for them. And I'll say that in two areas. One is in our core products. Our focus on customer success, the Customer 360. Now with the Slack user interface and everything being Slack-first but also our core values.

So many of our customers are attracted to us because in many cases they're going through an amazing values transformation and the areas that we've pioneered and now especially in regards to sustainability, which we'll talk about, because as you know, Salesforce has been a net zero company, but now we're fully renewable as well. And as we start to head towards the Fortune 100, I think that a lot of the companies that I met with today were mostly Fortune 100 CEOs. They crave to have that same net zero and renewable profile which is very exciting to see the world having this kind of sustainability focus. So I'm absolutely thrilled to see how the core business grew in the first half of the year.

I am excited about the outlook. I'm excited about our positioning with our customers, and I'll tell you, I'm very excited that five out of the last five quarters that we've had that 20% or greater revenue growth. And the three out of the last five quarters revenue greater than 20% operating margin, I don't think we could have said either of those things five quarters ago. So my hat is really off to the management team and to the employees for making this happen, and we're raising our guidance for the fourth time in a row as we see increased opportunities for additional revenue growth and additional operating margin capability this year.

And, look, we're the fastest growing enterprise software company ever. You know that. You're tracking us. You see where the numbers are going. You can see what the trajectory is, the velocity of the company both in revenue and margin, and now you can also see that no other software company of our size and scale is really performing at this level. So we are really quite confident and remain on our path to generate $50 billion in revenue by fiscal year '26 which doesn't seem very far away from right now. And when we first gave that number, it didn't seem as - it seems like it was so far away. Now it seems like, wow, this is going to happen. [Technical Issues]

Operator

Excuse me. The line of Mr. Benioff just got disconnected. We're trying to reconnect his line. Thank you. Again, we are trying to reconnect the line for Mr. Benioff.

Bret Taylor - President & Chief Operating Officer

Well, I think we had a few technical difficulties with Marc there. This is Bret Taylor. I'm going to continue with the script. Thanks, Marc, for that amazing introduction and that just reflects on the momentum of the company right now. It really was just an incredible quarter. Our products are more relevant than ever, and I've never seen this kind of momentum in the business. And honestly that's because CRM is more strategic now than it's ever been. Every digital transformation begins and ends with the customer, and that's why around the world more and more companies are putting their trust in Salesforce to help them get back to growth.

That's the agenda on every CEO's mind in Switzerland, and it's on the mind of every boardroom around the world. IDC just released their April 2021 SaaSPath Vendor Ratings, a survey of more than 2,000 companies worldwide and Salesforce is rated number one in trust, number one in product, number one in industry specialization, and number one in value for the price. That is just amazing. It's a true measure of just how mission-critical we are to our customers. And you can just see it in the incredibly strong performance of all of our clouds this quarter.

Sales Cloud has been number one in its category for more than a decade, and this year, we've reimagined the product to be the growth platform for digital sales teams. We are already seeing the result of Sales Cloud accelerated to 15% growth year-over-year. Our Service Cloud is also seeing amazing momentum. All aspects of customer service has gone digital from the contact center to field service to self-service and to bots. The scale of Service Cloud is just incredible. This is a $6 billion business whose growth has accelerated to 23% year-over-year. Our Marketing and Commerce Clouds also grew 28% year-over-year as every organization in the world is investing in direct, trusted relationships with their customers.

And every one of these digital transformations is also a data transformation, which is driving the unprecedented success we're seeing in Tableau and MuleSoft. Tableau is in nine of our top 10 deals this quarter, and MuleSoft was in eight of our top 10 deals. The real power of Salesforce platform is bringing all these capabilities together into a Customer 360, a single source of truth for your customers. Our industry strategy is enabling our customers to get started with an end-to-end Customer 360 faster than ever before, tailored to the specific needs of every industry. Our Industry Cloud saw 58% year-over-year growth in annual recurring revenue.

We had especially strong performance in the public sector, in our health cloud business, and financial services. In fact, four of our top ten deals in the second quarter came from the public sector. Our core organic business has never been stronger. Just like Marc said. And now with Slack, we're bringing a whole new dimension to Salesforce. There cannot be a more relevant product at a more relevant time for every single one of our customers. If you talk to any CEO, read the headline of any paper, or even look around the home office most of you are sitting in right now, you can see the depth of the transformation work has gone through this year.

Sales meetings have moved from conference rooms to Slack and to Zoom. Contact centers used to be buildings, and now they exist entirely in the cloud. My commute has moved from the highway to primarily my hallway. Slack is at the center of this. Slack is how organizations all around the world are finding success in this all-digital work-anywhere world. It's your digital HQ. It connects your employees, your partners, your customers on a single platform and a platform that people love to use. And the Slack-first Customer 360 makes every Salesforce product more powerful and more effective for our customers.

Our engineering teams have really hit the ground running on this integration. Just last week, we announced our Slack-first sales, service, marketing analytics at our launch event and we've got a ton of Slack innovation coming at Dreamforce. IBM is one of my favorite examples of a Slack-first Customer 360 company. Arvind Krishna is a close friend of mine, and in talking to him, he talked about how he believed that bringing Salesforce and Slack together is key for IBM to become even more connected, more productive, and more innovative. IBM has built their entire Customer 360 on Salesforce.

Over 530,000 customers, 380,000 employees, and 50,000 partners using our platform. And all of these employees are working in Slack. They've connected their workflows across Sales Cloud, across Service Cloud, and enabled them to connect and take action from anywhere. Slack comes up in every single one of my customer conversations and I could not be more thrilled with the momentum in the business. Slack's revenue accelerated to 39% growth year-over-year on a stand-alone basis and had great customer wins at Target, Lowes, Conde Nast, UNICEF, Norton Health Care. And what is really fun with this is looking at the growth of Slack Connect.

We've talked a lot about this. Slack Connect has the capability to enable you to connect not just with your fellow employees but to connect with your partners, with your vendors, and your customers. Slack Connect grew 200% year-over-year. This really illustrates the power of not just Slack for employee engagement but the Slack-first Customer 360. Slack is a once in a generation company that is transforming the way we work. And it's transforming the vision we have for our company over the next decade. I'm so grateful to be able to work with Stewart and the Slack group every day and I'm really excited to bring this vision of the Slack-first Customer 360 to all of our customers.

And if the technology Gods will allow, I'd love to transfer it over to Gavin to talk about some of our customer wins for the quarter. Gavin, are you around?

Gavin Patterson - President & Chief Revenue Officer

I'm here. Hi, Bret. Can you hear me?

Bret Taylor - President & Chief Operating Officer

Yes.

Amy Weaver - President & Chief Financial Officer

Yes. You sound great, Gavin. Go ahead.

Gavin Patterson - President & Chief Revenue Officer

Thanks, Bret. [Technical Issues] seeing the business. And you can see that really reflected in some of the remarkable customer wins we saw not just in the U.S. but around the world in the last quarter. Starting in the U.S., we saw our largest ever deal based on new annual return revenue which is in the public sector and it then set public sector is being fantastic for us in the second quarter. Other examples, we expanded relationships with great companies like PayPal and Coinbase, while in EMEA, we had significant wins behind - with Belron, who own things like Safelite and Autoglass, Fresh Fields, Dyson, Vodafone, and a [Indecipherable] business, Canyon Bicycles, which is a really great case study.

And then in APAC, we continue to deepen our relationships with many businesses, including things like Afterpay and FWB Thailand. So we're seeing strength internationally as well as in the U.S. Now, a couple of examples I want to get into a wee bit more detail on and one is a win with MillerKnoll. Now, you right remember them more as Herman Miller, but it's a fantastic example of a company pivoting with a great digital customer experience. So after the start of the pandemic, MillerKnoll saw a huge spike in demand for their furniture, not surprisingly.

Of course they turned to Salesforce to transform their e-commerce experience in the quarter and they're already seeing a significant improvement in conversion rates on the back of that. Since then, they've been providing an even better experience, tailored product recommendations, a streamlined checkout experience, and next generation video chat, and on top of that, MillerKnoll is a net zero company and they're now using Salesforce Sustainability Cloud to track their carbon footprint and other climate-related initiatives. So you can see it's a great example of how we're building partnerships, building multi-cloud solutions around the Customer 360, and we go from strength to strength.

I wanted to talk about RBC Wealth Management, which is another great win in the quarter. They're using the Customer 360 to streamline processes, integrate data from over 26 different systems to create a unified wealth management platform that provides advisors with a 360-degree view of every client. And I think that's something that really brings the Customer 360 to life for more than 2,100 RBC financial advisors. I think this example to me is very powerful. They've been using Salesforce work flow automation to transform the client onboarding process which was several weeks, more than 100 pages of physical documents, and it is now a digital task that takes just 24 minutes.

And that is quite remarkable, I think. GEICO was a great win in the quarter. Needs no introduction, of course. In case you don't know GEICO, it is the second largest auto insurer in the U.S., and they're really leaning into the power of the 360, the Customer 360, to create a single view of their customers across the entire business. And it's now more than 25,000 agents are going to be putting their trust in that Customer 360 which is now providing AI-powered analytics to improve those customer relationships. And 3M, now this is one we talked about in the past.

You heard Marc talk about how they're using the Customer 360 across 83 countries, but that relationship continues to expand. Now 3M are using Trailhead to train thousands of customer-facing employees as they join the company. Salesforce Maps is now being used as part of their proposition. Tableau CRM is giving actual intelligence to better manage operations, engage with customers, productivity, and then in Q2, 3M selected our Philanthropy Cloud to help empower nearly 100,000 employees to give back to their communities with the goal of achieving 2 million employee volunteer hours over the next five years. I think that's a really, really powerful example.

And then one more. Just before I hand over to Amy, and it's IKEA. So IKEA fantastic business over here in Europe. Another great example of the Customer 360. We've already been helping them with marketing. They've been getting a great ROI with Marketing Cloud across over 30 markets. Now, as home improvements were soaring in the pandemic, they turned to us to use Field Service to help schedule in-home planning visits, installations, after-service support across the U.S. So another example of how we're building our relationships, adding clouds to existing customers going increasingly into partnership type relationships.

So I think these are a few examples. There are many more, but they're all I think examples of how we're helping customers deliver success from wherever they are, from anywhere. So net-net, my conversations with customers I think are giving me great confidence not just in the demand for our products and services, but I think in our ability to execute in the second half of the year. So it's both demand and execution.

So I continue to see this being maintained, there's really strong demand environment across Salesforce in the second half and I think Slack is really going to enhance that. So just before I hand over to Amy, I'd just like to say a quick thank you to the amazing effort of the sales teams around the world. They've been able to adapt to a different way of working, a new normal, and in doing so, we've been able to continue to support our customers and I'd like to thank them for that.

So Amy, over to you.

Amy Weaver - President & Chief Financial Officer

Great. Thank you, Gavin, and good afternoon, everyone. Q2 was another quarter of remarkable top and bottom line performance. We exceeded our top line expectations, achieving record levels of Q2 new business. We saw strong demand across all of our products, regions, and customer sizes. And we were able to execute with discipline to drive higher operating income. We also completed the acquisition of Slack Technologies on July 21, bringing yet another best-in-class asset into our Customer 360. We believe that Slack will play a critical role in the digital transformation of our customers as they reimagine the future of work in a digital-first work from anywhere environment.

And that process is already underway with Slack's business accelerating into the close of the acquisition. In Q2, Slack's revenue grew 39% year-over-year on a stand-alone basis, which excludes any impact of purchase accounting. Slack also saw strong performance in customer acquisition, especially in the enterprise. The number of paid customers spending greater than $100,000 annually accelerated during the quarter, up 41%. For the short period between the close of the deal and the end of our fiscal Q2, Slack's operating results were immaterial to our non-GAAP results, and they are included below the line in OIE.

Slack is consequently excluded from our reported revenue and non-GAAP operating income. Where appropriate, we will call out Slack-specific impact on our Q2 results and our guidance. As part of the acquisition, this quarter we issued $8 billion of senior notes with a weighted average interest rate of 2.25% and weighted average maturity of 20 years. We were very pleased by the terms we received on what we view as an inexpensive source of capital. In particular, I'd like to call attention to the strong reception of our $1 billion sustainability bond, which was our most oversubscribed note in the offering. And not only did we raise funds on favorable terms, but concurrent with our debt raise, S&P upgraded our credit rating to A+.

Now, let me walk you through some of the results for Q2 fiscal '22, starting with top line commentary. Total revenue for the second quarter was $6.34 billion, up 23% year-over-year or 21% in constant currency. The strong new business pipeline that we've discussed the last few quarters enabled us to deliver these results as new business momentum continued to exceed our expectations. A few key highlights; we saw acceleration in Sales Cloud with Q2 revenue of $1.5 billion or 15% year-over-year growth. Tableau and MuleSoft continued their momentum in enterprise deals as both saw their share of the company's top 10 deals increase.

As Bret noted, Tableau was in nine of the top 10, and MuleSoft in eight of the top 10 deals this quarter. This is an incredible accomplishment and evidence of how strategic these acquisitions have become for our customers. Public sector continues to be an area of strength, accounting for four of the top 10 deals this quarter. And again this quarter, our seven-figure deals on average included more than 4.5 clouds. The number of seven-figure deals including five or more clouds grew by 29% year-over-year, showing continued momentum in our enterprise deals. And we continue to see strength in our international businesses, which accelerated sequentially, although we will note that EMEA and APAC growth benefited modestly from the integration of acquisitions into our billing practices.

We remain pleased with the progress on attrition with revenue attrition in Q2 between 8% and 8.5%, an improvement from last quarter's 9% to 9.5%. Attrition has continued to perform better than anticipated. As a reminder, our attrition rate is calculated based on trailing 12-month performance, and we have now lapped the second quarter of fiscal 2021, which was impacted by the early days of the pandemic. Our remaining performance obligation representing all future revenue under contract ended Q2 at approximately $36.2 billion, up 18% year-over-year.

Current remaining performance obligation, or CRPO, which represents all future revenue under contract that is expected to be recognized as revenue in the next 12 months, was approximately $18.7 billion, up 23% both year-over-year and in constant currency. Slack represents 4 points of growth, ahead of the 3 points we guided to last quarter, due primarily to changes in our assumptions around purchase accounting. Turning to operating margin, Q2 non-GAAP operating margin was 20.4%, benefiting from revenue outperformance, efficiencies from a work from anywhere world, and the focus on disciplined spending. Salesforce recorded $45 million of transaction-related costs due to closing the Slack acquisition during the quarter.

Q2 GAAP EPS was $0.56 and non-GAAP EPS was $1.48. The outperformance in the quarter was primarily due to higher revenue and expense efficiencies as well as realized and unrealized gains on our strategic investments portfolio. These mark-to-market adjustments benefited GAAP EPS by approximately $0.42 and non-GAAP EPS by approximately $0.43. Turning to cash flow, operating cash flow in the second quarter was $386 million, down 10% year-over-year. On the cash basis, Salesforce paid $43 million of transaction fees related to the Slack acquisition. Capex for the quarter was $213 million, leading to free cash flow of $173 million, down 45% year-over-year.

And as a reminder, we continue to expect cash flow seasonality to skew higher to Q1 and Q4. Slack's operating results had no impact to Q2 operating cash flow or capex. Now, turning to guidance, we expect Q3 revenue of $6.78 billion to $6.79 billion or approximately 25% growth year-over-year. This guidance assumes a $250 million contribution from Slack. For Q3, we expect to deliver CRPO growth of approximately 22%. This includes 4 points of growth from Slack. We expect Q3 GAAP EPS of negative $0.06 to negative $0.05 and non-GAAP EPS of $0.91 to $0.92. Now moving to fiscal 2022 guidance updates. As a result of our year-to-date performance and strong execution in the current demand environment, we are raising our fiscal '22 revenue guidance by $300 million to $26.2 billion to $26.3 billion, or approximately 24% growth year-over-year.

This guidance incorporates an expected revenue contribution of $530 million from Slack in the second half of fiscal '22, an increase of $30 million over our previous guide. This guidance also includes $200 million from Acumen, an increase of $10 million from our previous guide. Net of the revised Slack and Acumen contributions, this represents a $260 million raise on our core business. Our ability to execute in the demand environment both remains strong. We are also raising our fiscal '22 non-GAAP operating margin to 18.5%, representing an expansion of 80 basis points year-over-year.

This now includes an expected 150 basis points headwind from Slack and Acumen or 10 basis points less headwind compared to our previous guidance. Excluding this 10-basis point adjustment, our operating margin guidance represents a 40-basis point raise compared to our previous guidance. We are also raising fiscal 2022 GAAP diluted EPS to $0.81 to $0.83 and raising our non-GAAP diluted EPS to $4.36 to $4.38. We expect recent M&A will be an approximately $0.51 headwind to non-GAAP diluted EPS. Please recall that our OIE and EPS guidance assume no further contribution from mark-to-market accounting as required by ASU 2016-01.

We are raising our fiscal '22 operating cash flow guidance by 2 points, now expecting 14% to 15% growth year-over-year. The increase from our previous guide is primarily driven by revenue performance and lower headwind from M&A. The dilutive cash flow impact of Slack and Acumen now represents a headwind to our year-over-year growth of approximately 7 points. Excluding the anticipated impact of M&A, operating cash flow growth would be 21% to 22%. We continue to expect capex to be approximately 3% of revenue in fiscal '22 resulting in a free cash flow growth rate of approximately 15% to 16% for the fiscal year.

Excluding the anticipated impact of M&A as previously noted this rate would be 22% to 23%. To close, we remain excited by the strength we see in the demand environment and we're seeing record levels of revenue and operating margin. Our flagship product and Sales Cloud saw acceleration this quarter. We closed our largest deal in customer history. We had an impressive first half of fiscal '22, and we're excited to continue Slack's momentum with the power of our two companies now together. And the increased revenue guidance reflects the confidence we have in the fundamentals of our business, and we remain well on our way to achieving our goal of $50 billion in fiscal '26.

We are committed to being disciplined along the way while challenging ourselves to find additional areas of operational improvement. I want to say thank you to all of our employees for being able to focus on disciplined efficient growth during the quarter, and we're looking forward to further strengthening the durability of our operating model going forward. And finally, I look forward to engaging with many of you at our upcoming Investor Day on September 23.

I'll now turn the call back to Marc for some final comments.

Marc Benioff - Chair & Chief Executive Officer

All right. Well, thanks, Amy. Hopefully I'm back here.

Amy Weaver - President & Chief Financial Officer

You are.

Marc Benioff - Chair & Chief Executive Officer

And I'm actually now talking through Amy's cell phone connected to our speakerphone in our conference room in San Francisco. So turned out the cell phone technology is the big winner. So, anyway, thanks, Amy. That was a great job on earnings and congratulations on another great quarter for the organization and everything you're doing. I couldn't be more excited about the strength of our core business, our revenue growth, our margin growth, our cash flow growth, as well as the addition of Slack now to our unicorns, if you will.

I mean, it's absolutely true, the best CRM just got better with Slack, and I - when you listen to what Bret had to say about the integration of incredible things like Slack Connect, these are becoming extensions to our CRM capabilities. So it's a very exciting moment for our entire product line and our technology team. And I think that with that, our leadership team has really shown through this amazing perseverance and execution over the last several quarters these amazing results. Now we're going to have our digital Dreamforce coming up in San Francisco in less than a month from September 21 through September 23.

We'll have tens of millions of customers from all over the world tuning in with us and we'll have hundreds of customers with us live in San Francisco as well. So it's going to be extremely exciting. We want you all to have a front-row seat. And please talk to Evan so you're all connected to this program. And we will also be redeploying our Dreamforce to You program as well, delivering custom Dreamforce capability for all of our customers. So I hope that you're all going to join us. Okay. So as Amy mentioned, we're also looking forward to having you then at Investor Day. That will also be amazing. And we're expecting some awesome conversations with all of you.

So with that, I'll open it up to questions. So everybody is online right now, and we can take all your questions. So go ahead, Evan.

Evan Goldstein - Senior Vice President, Investor Relations

Operator, you can go ahead and open the call for questions.

Question & Answers

Operator

Thank you. [Operator Instructions] The first question comes from the line of Kirk Materne with Evercore. Your line is now open. You may ask your question.

Kirk Materne - Evercore Group, LLC - Analyst

Yes. Thanks very much. Bret, maybe I wanted to ask you one about Slack. In particular, now that the deal is closed, and I know you're very excited about it and the whole team is. What are you measuring to sort of judge success with Slack, maybe beyond just sort of revenue growth in terms of sort of number of customers, number of multi-cloud deals that include Slack? I guess, what should we be looking for to see that the deal is progressing as planned and it is that sort of one plus one equals seven combination that you guys are betting on?

Bret Taylor - President & Chief Operating Officer

Yeah, thanks, Kirk. I think first and foremost, we're excited about this vision for the Slack-first Customer 360, and that's really building not only an integrated vision between Slack and our Customer 360 platform but also integrating our products. And actually I think we've made a faster start to integrating our technology than any acquisition in our history. We did an event last week on this idea of a digital HQ where we announced Slack-first sales things like deal rooms inside of Slack Connect integrated with Sales Cloud, Slack for service which are things like case swarming for digital customer service teams, Slack-first marketing, Slack-first analytics.

So those capabilities are going to be in the hands of our customers soon and we have a lot more innovation coming at Dreamforce as well. And with that, what we're measuring is as you said it's going to show up in things like multi-cloud deals that include Slack. It's also going to show up in a lot more departments and a lot more companies who are perhaps using these digital collaboration technologies for the first time in the context of doing their job, in the context of customer service, in the context of sales, in the context of marketing, and really realizing this vision of the digital HQ.

I think Marc has talked a lot about how we're in this new pandemic world, that this isn't going away. We have opened half of our offices, but as you can imagine, not as many people are showing up as we had hoped to at this point because of this pandemic. I started two companies and it all started by planning my office space, and now if you start a company, you start by planning your digital HQ. And that's really what we really want to bring to every company in the world. Help them build a digital infrastructure that will help them succeed in this new normal. And one thing that I think we're really excited about that Marc also mentioned is Slack Connect, which is really bringing these digital tools outside of the walls of our customers' buildings and bringing them to partners and customers as well. And you've seen that in a lot of the product integrations we announced.

Operator

Thank you. The next question comes from the line of Mark Murphy of J.P. Morgan. Your line is now open. You may ask your question.

Mark Murphy - J.P. Morgan Securities - Analyst

Yes, thank you very much. Congrats on a fantastic quarter. Gavin, we have heard that you're selling Slack by actually using it with customers in the selling process itself. I was wondering if you can help us visualize that, and is that something that's transforming the buying experience in a pretty profound way? And just a quick one for Amy. It's fantastic to see the operating margins 20%-plus again consecutive quarters. Where are you identifying new efficiencies to try to create this trajectory on margins? Because it seems like it goes beyond the temporary COVID savings.

Gavin Patterson - President & Chief Revenue Officer

Well, great question. And I'd just like to say I share Bret's and Marc's and Amy's excitement about the potential that Slack is going to bring to the Customer 360. Since we announced the deal six months ago, nine months ago, obviously we've been having conversations with customers about what we're planning to do recognizing it is needing to go through the DOJ process. And I have to say I rarely come across a product that has the buzz, the excitement, the customer advocacy that Slack does. It really is quite remarkable.

So there's I think huge interest out there amongst customers, many of our customers are both Salesforce customers and now Slack customers. So there's good overlap between the two and they can see the synergy that we're going to have from a product perspective. We are beginning to sell through Slack. The most powerful presentation sales teams give are often Salesforce on Salesforce, and so Slack on Slack is a very compelling way to explain how we use the product. And so we're beginning to see more and more of that.

And where we are closing deals, we're leaning in to close deals through you closing the deal itself on Slack creating channels between us and the customer and ensuring that everybody who is working on the deal can have real-time access to those channels. And it means that deals close much more quickly. So in fact the Slack deal itself was closed on Slack. So that is a perfect example of Slack on Slack, I think. Amy?

Amy Weaver - President & Chief Financial Officer

Great. Thanks, Gavin. And you're right, we use Slack to negotiate, to do - we conducted our due diligence, our negotiation, and integration for Slack. So I do think that that's the ultimate example of a terrific sale all conducted with Slack and Slack Connect. So, Mark, turning to your other question about operating margin, so where we have really seen this growing this year, first, we are gaining the benefit of very strong business performance in Q1 and Q2 and that does allow us to provide profitability. And that's while still investing in growth and absorbing the impacts of M&A.

Second, we are continuing to build on what we learned during the pandemic about how we can work effectively in a digital-first or a hybrid environment. Some examples of that virtual go to market motions, sales enablement which is largely virtual at this point or digital and also renewed emphasis on financial automation, which I believe will pay off in the long run. And then finally it's simply an approach of disciplined decision-making, and when we're seeing investment opportunities, we're taking a very hard look. We are challenging ourself and we're finding ways to shift our operating model where necessary.

Operator

Thank you. We have the next question comes from the line of Brad Sills of Bank of America Securities. Your line is now open. You may ask your question.

Brad Sills - Bank of America Merrill Lynch - Analyst

Oh, great. Thanks for taking my question, and congratulations on a real nice Q2 results here. I wanted to ask another one on Slack, but more focused on Slack plus Tableau. With the combined offerings, you really have a powerful solution to not only see the data but act on the data. You highlighted this last week at the marketing event where you launched a number of these scenarios and activated notifications and watchlists were included. So I'm just curious about that concept of kind of Slack plus Tableau combined. What are you hearing from customers and the reception there, and could that actually accelerate these kind of cross-cloud Customer 360 deals? Thank you.

Bret Taylor - President & Chief Operating Officer

Yeah, thanks for the question. We're really excited about the combination of Slack and Tableau, and it sounds like you watched the event, but for other folks on the call who didn't, we showed I think a really wonderful integration between Tableau and Slack, so your data can talk to you. Automated notifications so that when you need to take action on data, you're getting notified in Slack, you can collaborate with your colleagues to diagnose a business issue, just an incredible combination.

But I think it really shows just our philosophy on our M&A and why I think we've had really unprecedented success in the marketplace and integrating our acquisition successfully. We really try to integrate our platform, and with Tableau, with MuleSoft, with Slack, this all amplifies our vision for Customer 360. At the center of all these digital transformations our customers are going through is data. You need to integrate that data with MuleSoft. You need to see and understand it with Tableau. And you need to act on that. And that's all going to happen with Slack, which is a system of engagement for the Customer 360 but also the system of engagement for every application of your company.

So I think it's an incredibly powerful combination, and I actually think Slack has the potential to really accelerate every single product in the Customer 360. Tableau included. And Tableau especially but really I think it has potential across the board. And it really goes to just the fundamental shift in the workplace we're all experiencing. All of you are probably working from home right now or most of you are. This digital HQ is at the center of every single one of the transformations we're bringing to our customers.

Operator

Thank you. Next question comes from the line of Kash Rangan with Goldman Sachs. Your line is now open. You may ask your question.

Kash Rangan - Goldman Sachs & Co. - Analyst

Hey, Kash Rangan. Congratulations. My question is for Amy and maybe a little bit from Gavin. Amy, how are you able to fund growth initiatives at the same time drive operating efficiencies? And, Gavin, maybe you can shed some color on that as it pertains to the distribution side of the equation. How are you able to accomplish growth and efficiencies in terms of margin? Thank you so much, and congratulations on a fantastic quarter.

Amy Weaver - President & Chief Financial Officer

Great. Thanks, Kash. On operating margin, like I said, I think we have to be able to drive growth and increasing profitability at the same time. As I mentioned, we've been doing that this year through terrific business performance, through efficiencies, through the work from anywhere, and then as well as through discipline. And Marc talked about a new operating model. I actually like to think about it more as a new operating mindset. And it's a real focus on discipline and looking at what is going to make us a company that not just only gets us to $50 billion but makes us a strong durable company when we get there and positions us to sail through that. So these are multiple changes around the company but I've been really gratified to see everyone jumping in. This has really been an effort from the entire executive leadership team.

Gavin Patterson - President & Chief Revenue Officer

And then I'll answer the second question there, Kash. So we've just come off our half year review in Hawaii where we got our top 100 executives together in person and reviewed the last six months and looked ahead into the future. And I was really happy and I was able to share two fantastic quarters to start the year and really strong demand - really strong execution, and as I look into the second half of the year, I see that continuing. The pipeline is really strong. The conversations we're having with customers are accelerating, if anything. And so we chose to make a decision three months ago because we could see this demand in the marketplace.

We chose to increase our investment in our direct sales force to get better coverage with customers. And that is a sign of our confidence in the business. So I feel very confident that we can continue to grow top line while delivering on expectations and operating margin. It isn't a trade-off. I think there's a balance that we can get between the two making sure we seize the opportunities in the marketplace, we're able to serve that demand, we can see from customers, there's multi-cloud deals that I was talking about earlier, while at the same time ensuring that we benefit from scale, and we see that in the operating margin.

Marc Benioff - Chair & Chief Executive Officer

And can you also add what you see in the selling motion versus the United States versus here in Europe?

Gavin Patterson - President & Chief Revenue Officer

Well, I think what's common, Marc, is there is - it's a conversation that's happening with the CEO now. So digital customer transformation is no longer something that is delegated down the organization. It's a conversation that's going on in the boardroom, it's a CEO priority, and that means we're getting I think bigger deals, more multi-cloud deals, multiyear deals, and it's increasingly a conversation about the Customer 360. And the real focus is on time-to-value which is good for us. We want as much - we want our customers to be - understand our products as much as possible, configuring, yes, customizing not so much because there's so much innovation coming through.

And it's easier to do through staying on the standard path. So it's either in the U.S. or in Europe, we're seeing our business grow across the board both in terms of small customers on one end, the SMB market, all the way up to multinationals. We're seeing increasingly bigger deals. We've highlighted our biggest-ever deal in terms of recurring revenue in this quarter, and it's a public sector deal. But we're seeing more and more not just million dollar plus deals but $10 million deals coming through the business. And I think that's a sign of I think the increasing importance of the Salesforce offer and what it means to businesses.

Operator

Thank you. The next question comes from the line of Keith Weiss of Morgan Stanley. Your line is now open. You may ask your question.

Keith Weiss - Morgan Stanley Investment Research - Analyst

Excellent. Thank you, guys, for taking that question. And really nice quarter and really a nice first half of the year. And I think it echoes the comments from both Marc and Amy. I don't recall seeing this type of raise to the full-year guide in terms of top line revenues or definitely not this type of raise to the operating margin guide historically, especially in the first half of the year. I was hoping maybe Gavin or Marc, you could talk to what are you guys seeing in the pipeline that's giving you the confidence to increase guidance in the first half of the year, for the second half of the year already?

And maybe to Amy, when we see this operating margin expansion, is this durable, if you will, on a go-forward basis? And in particular, should we be thinking about T&E expenses or some of the kind of reflation of that opex line that might be being pushed out because of Delta variant or a sort of a slower re-opening pace into future years, or is this margin expansion going to be more durable? Thank you.

Marc Benioff - Chair & Chief Executive Officer

Let me take that, a swing at that. In so many of the CEO conversations that I'm having, and let me emphasize the ones I'm having in Europe, number one because of the Green New Deal that's happening here in Europe, every CEO here is focused on their net zero transformation, and they realize that for them to continue to be successful in this environment in this economy, they're having to make a net zero transformation. And that's been very important to us. We made that transformation and now we're fully renewable as well as I mentioned.

The second thing is I think every CEO that I mentioned talked to today and yesterday and probably in conversations that I've had the last several months are going through all types of supply chain challenges. I'm sure you're hearing that in your own checks with your clients, but that's been very surprising to me. And I would say that's the second CEO priority. And then I'd say the third CEO priority is exactly what we've been talking about here, which is success from anywhere in this new world. They realize their employees are not coming back exactly as they wanted.

I have some stories about when we first started talking about success from anywhere and that employees would have a choice between office, home, maybe working in an environment like we had last week in Hawaii with our program, or as you know, we're building this new ranch, CEOs would call me and say, Marc, you don't understand. Everybody is coming back. Everything is going back the way it is. The pandemic is over. And I think now those calls have stopped, and people realize things have really changed. This pandemic has changed things, and work has changed. And when we talk about digital HQ, we might have been talking about digital HQ before the pandemic, but after the pandemic, it means something very different.

And I think that what Bret said kind of on the fly there which was very powerful that he's obviously been an incredible entrepreneur as well as an operating executive in several companies, but if he was starting a new company, he's not planning his physical office space. He's planning his digital office space. And we're running this call now on a cell phone and on Zoom. And it's a very much an example of success from anywhere. But every company has to make this transformation. And that is what is driving our success going forward. This is not a small transformation. This is not a small change.

This is why we would pay $27 billion for Slack. We believe so strongly that the world has changed, that the past is gone, that we are in a new world. And, yes, we may - I don't think the Delta variant will be material to our business. If anything, it only accelerates it. And Delta is not the last one of these things that we're going to see. We're seeing a constant now parade of these variants going by. It started with Alpha, and I don't know how many letters there are in the Greek alphabet, but Delta is not the last letter. So we know that. In fact, here in Europe, if you hadn't read about what happened with Lambda two weeks ago, you probably should.

But in all of those things, we're looking to - life has to go on. And it is. And if you're here with me today and you'd say well, there is probably some risk to what's going on. There probably is. But I'm vaccinated. Gavin is vaccinated. And we're running our business. And that is really the power, and that is the future of what's going on. And I think that this is what we all have to kind of get our head around. And I think in San Francisco, it's very different than how it is right here in Geneva, Switzerland. Let me tell you. It's very, very different.

I was in office buildings today. There's nobody in my office building right now. And also people are not wearing masks in office buildings here. Everybody is supposed to wear a mask legally in San Francisco right now. So the things are different, and this is what is amplifying us. So we're in a tremendous new world, and Salesforce has never been more positioned or I would say Salesforce has never been better positioned for an economy and for world. The first thing that I heard from Gavin was we're open for business, and this is where we're going. Do you want to add to that?

Gavin Patterson - President & Chief Revenue Officer

I want to talk a little bit about the pipe, Marc, and our confidence in it. And we've put a lot more focus on executional excellence if you like and grip on the operating metrics around the pipe going forward. So I have a great deal of confidence in what I can see. We've spent a lot of time looking at how everybody in the sales organization is contributing through participation and through enablement, through productivity, and really driving performance across each of the OUs.

We flattened the structure so that we can move in a more agile manner and give more accountability to operating unit leaders. And it's that focus on second and third order metrics around the sales operation that means that I can have the confidence as I look forward into what we're going to deliver over the next not just two quarters probably into next fiscal as well. And it's a balanced pipe. So the strength across the board, you can see it in the numbers that we've released today. I see that going forward. All clouds are contributing. There isn't any weakness across there.

Marc Benioff - Chair & Chief Executive Officer

That's amazing, isn't it?

Gavin Patterson - President & Chief Revenue Officer

Yeah.

Marc Benioff - Chair & Chief Executive Officer

And I think it also speaks to what Bret said as well in terms of we've had a real focus with our acquisitions to make sure they're integrated, that we're selling a platform. We don't use the word suite at Salesforce. That hasn't been part of our nomenclature. But we have a very nice integrated platform, and we have a lot of very relevant products in today's world. It's kind of amazing, isn't it?

Gavin Patterson - President & Chief Revenue Officer

It is. And geographically, just to finish with, there's again strength across the board. The U.S. consistently growing 20%-plus in revenue. EMEA 32% this quarter. APAC 26%. So we're growing across the board and growth internationally is not coming at the expense of growth in the U.S. And that's why we're posting these really strong numbers. And our strength in the core business, the core clouds, is something that we really.

Marc Benioff - Chair & Chief Executive Officer

And you've been able to - and I think at this point, Bret, as well, but this new operating margin model that we're executing that I think several of our friends who have been asking questions have picked up on that we are operating at a different type of model here. We've had now three of the last five quarters greater than 20%, and we have a lot of swagger when it comes to our operating margin.

The pandemic let us - kind of have a beginner's mind in regards to our entire business, and we made strategic decisions, we made tactical decisions, but we also made decisions in our core way that we're operating our business, and you can see that with these operating margin results and also I'm sure it was subtle to everybody but after doing one of the biggest acquisitions in our history, we also just raised our operating margin again and our guidance. So that is very exciting. Amy, do you want to just add to that?

Amy Weaver - President & Chief Financial Officer

Yeah, sure. Keith, to follow up kind of the end of your question, as Marc said, we are in - he said very powerfully. This is a new world. We are not going to the pre-pandemic way of working. And we learned a lot during this period. We learned how we can work effectively from anywhere, how we can sell virtually, and when you look at what is durable, I would say discipline is durable. And we need to apply this discipline going forward and just show you quarter after quarter that we can execute.

Marc Benioff - Chair & Chief Executive Officer

And I will just say that we switched to several very powerful values, operating values when the pandemic started, the management team understands it very well at Salesforce, but we wanted to make sure that we were relevant to our customers and that they understood our relevance. I don't think we've ever been more relevant. We also realized we have a lot of people who are really scared during the pandemic and that we need to get them to be confident and that they could participate, and I think that's definitely happened. We need to make sure that we are able to execute tactically and strategically and to fully enable what you can see is an extremely large workforce heading towards 100,000 people.

We need to make sure those people are enabled and rolling and focused. And we've done that. And I think in all of those things, the management team has executed. I'm very grateful to the management team and how well they've done. We've also gone through a lot of management transformation. I'm sitting here looking also at Mark Hawkins, who is our CFO Emeritus. Mark, thank you for everything that you've done for the company as well. And he's on the call here helping us and coaching us through, and Evan. And I look out at all of our Ohana and all of our employees for everything that everyone has been through, we have a lot of gratitude that we've been able to deliver at this amazing moment. And this is not our last amazing moment. There are some more amazing moments coming. And very excited about the future. So with that, I will turn it back over to you, Evan.

Evan Goldstein - Senior Vice President, Investor Relations

Thank you very much. We appreciate everyone joining the call today. [Technical Issues] Well, we're continuing with some technical challenges. But thank you guys for joining the call today. If you have any questions, you can contact us at investor@salesforce.com and we look forward to engaging with you at Dreamforce and at Investor Day. Thank you very much.

Operator

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Q2 2022

Earnings Transcript

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