John Cummings - VP, IR Keith Block - co-CEO Marc Benioff - Chairman and co-CEO Mark Hawkins - President and CFO Bret Taylor - President and Chief Product Officer Monica Langley - EVP, Global Strategic Affairs

Bhavan Suri - William Blair Kirk Materne - Evercore ISI Richard Davis - Canaccord Raimo Lenschow - Barclays Keith Weiss - Morgan Stanley Heather Bellini - Goldman Sachs Mark Murphy - JPMorgan Ross MacMillan - RBC Capital Markets John DiFucci - Jefferies Terry Tillman - SunTrust Robinson

Good afternoon, ladies and gentlemen. My name is Jerome, and I will be your conference operator today. At this time, I would like to welcome everyone to the Salesforce Second Quarter Fiscal Year 2019 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session [Operator Instructions] Mr. John Cummings, Vice President, Investor Relations. The floor is yours.

Thank you so much, Jerome. Good afternoon, everyone, and thanks for joining us for our fiscal second quarter 2019 results conference call. Our results press release, SEC filings, and a replay of today’s call can be found on our Investor Relations website at www.salesforce.com/investor. With me on the call today is Keith Block, co-CEO; Marc Benioff, Chairman and co-CEO; Mark Hawkins, President and CFO; and Bret Taylor, President and Chief Product Officer. As a reminder, our commentary today will be primarily 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, which are subject to risks, uncertainties and assumptions. 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 are included in our SEC filings, including our most recent report on Form 10-Q. With that, let me turn the call over to you, Keith.

Thanks, John. Thanks everybody for joining us on the call today. It’s an exciting time in our industry, it’s an exciting time for our customers, and it’s an exciting time for Salesforce. And as you can see from our results, we continue to deliver incredible growth at scale. You saw it at the end of FY18, you saw in Q1, and you see it again in Q2. We are seeing unprecedented level of CEO engagement, driven by an appetite for real digital transformation. And at the same time, we are in the midst of an economic environment and fueling innovation. And as a result, our customers are making major and sustained investments in growth and Salesforce is at the forefront of their growth strategy. CRM has never been more strategic. It is the largest and fastest growing category in enterprise software. Salesforce is the number one provider and after 20 years, we continue to take share and separate from our competitors. In fact, we’re growing at nearly twice the rate of the market. This gives us tremendous confidence in our ability to reach $23 billion in revenue by FY22 faster than any enterprise software company in history. Our vision, our execution and our relentless focus on customer success resulted once again in excellent performance across all clouds, all geographies and all industries in Q2. Revenue for the quarter rose almost $3.3 billion, up 27%. Revenue under contract, which we now call remaining performance obligation, grew 36% to approximately $21 billion. And based on these strong results, we’re raising full year revenue guidance by $50 million to $13.175 billion at the high end of the range for 25% growth this year. Clearly, we are set up for a strong second half. In Q2, Sales Cloud grew 13% surpassing $1 billion in quarterly revenue for the first time. That is incredible milestone. And in the quarter, we expanded our relationship with 100-year old CPG company that’s undergoing a multiyear digital transformation. We’re leveraging Sales Cloud and Marketing Cloud, Service Cloud and Einstein to accelerate decision-making and support customer-centric growth across their portfolio of brands. This is a great example of an iconic industry leader stepping into the future with Salesforce. Service Cloud grew 27% as more and more companies include National Grid and Southwest Airlines turn to Salesforce to power their next generation customer engagement. Southwest, which has won awards for its customer service leadership is extending Service Cloud and Einstein to 4,000 service representatives nationwide, enabling them to deliver smarter and more personalized customer experience. Marketing and Commerce Cloud grew 37%. In Q2, we expanded the Kimberly-Clark whose products are used every day by one quarter of the world’s population. We also deepened our relationship with Hulu, which is using Marketing Cloud, Service Cloud and Einstein to personalize the viewer experience for more than 20 million subscribers. And finally, the Salesforce platform grew 32% in Q2, 54% including MuleSoft. Customers continue to embrace the platform and Heroku, the Lightning App Builder to Shield and make all of their apps smarter with Einstein. Now, this is our first full quarter with MuleSoft, which is off to a fast start. The MuleSoft Anypoint platform has become [indiscernible] for digital transformation. It’s in every conversation we have with senior executives. And in Q2, New York Life, the State of Colorado and Schneider Electric selected MuleSoft to transform their enterprise. In our international business, we continued to deliver strong revenue growth across key regions, 32% EMEA, 28% APAC all in constant currency. In EMEA, we strengthened our relationships with Rabobank Group. We also had a great Commerce Cloud win with leading Dutch retailer Ahold Delhaize. In APAC, we expanded with MUFG and Mitsui Sumitomo Insurance in Japan. In Australia, we expanded with the country’s largest telecommunications provider Telstra and we formed an exciting new relationship in the public sector with Australian Health Practitioner Regulation Agency. Now, turning to industries. We continue to see great momentum in this space. In healthcare, we launched Health Cloud for Payers to make it easier for insurance companies to effectively and efficiently connect with members and providers. We also significantly expanded with one of the largest private payers in U.S. leveraging Health Cloud and Service Cloud to enhance their members’ experience and reduce the cost of care. In the quarter, IQVIA, a leading life sciences company significantly expanded with Salesforce and they are leveraging Health Cloud and the Salesforce platform to build innovative solutions to address the clinical, commercial and regulatory needs of their clients. In financial services, we expanded with [indiscernible] and had a great financial services cloud win with one of the largest banks in the UK. You may also remember that we had our most significant public sector win with the U.S. Department of Agriculture last quarter, while in Q2, the USDA significantly expanded again with Salesforce rolling out Service Cloud and the Salesforce platform across their entire agency. Now, on the partners. Partners are absolutely critical to the Salesforce growth strategy, bringing deep industry and domain expertise that they extend our reach and help drive our customers’ digital transformation. And our partners continue to strategically invest in their Salesforce practices. In fact, our top five SIs increased their total Salesforce certification by 50% in Q2. Now, as mentioned before, to keep partners run their businesses on Salesforce and in the quarter we’ve had significant expansion with Deloitte and they are rolling out Salesforce to more than 300,000 employees. So, as you can see, it was a fantastic quarter of execution across the entire Company, our clouds, our geographies, our industries. And we’re absolutely well-positioned for the second half of the year. And finally, I celebrated my fifth anniversary at Salesforce in Q2. It has been an incredible five years and I couldn’t be more excited to lead this Company with Marc for many years to come. I want to thank our customers, our partners, our employees and our shareholders for their continued trust in us. And now, I’d like to turn the call over to Marc.

All right. Thanks so much Keith and congratulations on your promotion as co-CEO. Well done. And as you heard from Keith, it was another outstanding quarter here at Salesforce. And honestly, I feel things have never been better. And I want just take a few moments to talk about the larger forces that are fueling and shaping the phenomenal growth of this Company and our industry. Our drive to $23 billion in revenue in fiscal year ‘22 and beyond is being driven by a technological revolution that’s fundamentally transforming our society, the Fourth Industrial Revolution. In terms of its size, depth, capability and speed, this revolution is altering the human experience in ways we’ve never experienced before. Our customers are going through an amazing digital transformation, each and every one of them; it’s starting and ending with their customer. And as every company transforms their relationships with their customers using amazing technologies from artificial intelligence to the cloud itself, they are fundamentally changing how they sell and how they service, how they market and they innovate. They are connecting with their customers in a whole new way. They’re building incredible new intelligent 360 degree views of their customers, and they are using extraordinary new tools to get faster, more informed decisions through advanced analytics. And at the heart of all this transformation is Salesforce. Our position as the number one sales, number one service, number one marketing and number one CRM platform is enabling our customers to stay ahead and drive in this Fourth Industrial Revolution. And as more and more companies connect everything and everyone, they are realizing that integration is vital to their success and to their digital transformation. And now, they are turning to Salesforce MuleSoft, the number one Integration Cloud to do it. Looking more closely. One of the critical aspects of the Fourth Industrial Revolution is artificial intelligence, the power of machine learning and especially deep learning to give computers the ability to learn from all kinds of data and giving our customers the ability to learn about their customers and be far more personalized, efficient, effective in their relationships. Salesforce Einstein, our own artificial intelligence platform now provides our customers with over 3 billion predictions and insights every single day. That’s amazing. And with the next generation of Salesforce Einstein that we introduced in the second quarter, Einstein Bots, first made available on our Service Cloud. Our customers can now unlock even deeper customer insight, deliver a transformational customer experience whether it’s with the service agent, whether a sales agent or whether a bot itself. We’ve demonstrated our leadership in AI by open sourcing our automatic machine learning library for structured data, which is the engine that helps power Salesforce Einstein. And our Salesforce research team introduced deep learning breakthroughs that make it possible for the first time for a single model to master 10 different natural language processing tasks at once, significantly improving the way machines understand the many nuances of human language. It’s an incredible step forward for artificial intelligence. With our acquisition of Datorama, also happened in the second quarter, we are also now able to expand our Marketing Cloud and bring all of our customers’ marketing efforts to do single intelligent task forward, so customer spend less time looking at spreadsheets and more time acting on the right insights to drive business decisions. Also, in the second quarter, we extended our strategic alliance with Google to deepen the integration between our Salesforce Marketing Cloud and their Google Analytics 360. And we’re seeing amazing traction with customers that are experiencing the best of both worlds, Salesforce and Google together. Salesforce Commerce Cloud continues to be the fastest growing enterprise commerce solution, delivering amazing results this quarter for marquee clients, like adidas and L’Oréal. We extended our Commerce Cloud with another great acquisition CloudCraze, the leader in B2B commerce, natively on the Salesforce platform. This means, now with the Salesforce Commerce Cloud, our customers can prove the same commerce experiences for their B2B business buyers that they do for their B2C consumers, all from a single platform. As you can see, the Fourth Industrial Revolution is well underway here at Salesforce. Everyone and everything is more connected than ever before. And as part of that, we see an incredible community grow up as well, all around us and supporting each other to incredible new heights. These are our trailblazers. And they are harnessing the power of our technology to transform not just the companies and industries, but their lives and their careers. I have to tell you, these trailblazers are an inspiration. More than 1 million people have now used our free online Trailhead platform to learn Salesforce skills and elevate their careers and become Salesforce trailblazers. They have run more than 8.5 million batches, certifying their skills and positioning them for jobs into digital economy. In fact, this Salesforce economy will now create 3.3 million new jobs by 2022. That’s amazing. And yet another example of how Salesforce is powering is Fourth Industrial Revolution. And that’s why this year’s Dreamforce, which is just going to happen on September 25th is going to be even more than highlighting our incredible technology, it’s going to be a celebration of these trailblazers. Dreamforce is going to run from September 25th to September 28th in San Francisco. We’re bringing together thought leaders, industry pioneers and more than 100,000 trailblazers for whole four high-energy days of learning, inspiration and quality fun, and I’m sorry to say, if you don’t have your tickets, it’s already sold out, amazing, first for Dreamforce. Finally, in all of our work, Salesforce is guided by our core values. Many of you know that; you heard us talk about that now, our core values, trust, customer success, innovation and the equality of every human being. As you know, Salesforce has always tried to use those values as a beacon of life for our industry. This started with our finding, with our 111 model getting back. And most recently, it has evolved with our deep work and the quality. Discussions we have had with our Ohana over the past few weeks, have raised larger questions about not just the Fourth Industrial Revolution and what’s happening, but also about how our values and our core values apply to the use of Fourth Industrial Revolution technology and also any unintended consequences of their use. We’ve seen this discussion take place in many companies. As well we can see that happening today on the new cycle. It’s been amplified by the amazing recent progress in artificial intelligence and especially deep learning. Now, here at Salesforce, we have determined that this ethical and humane use of technology, especially within this context of the Fourth Industrial Revolution, it must be clearly addressed, not only by us, but by our entire industry. Our industry has reached an inflection point that must be supported by a strong set of guiding values. We all know that and you see that every single day. We know the technology is not inherently good or bad. It’s what we do with it that matters. And that’s why we’re making the ethical and humane use of technology, a strategic initiative at Salesforce. We have appointed a new officer, an individual task for a new office and ethical and humane use. And we will work with all of our Ohana, including our customers, our employees, our partners as well as industry groups and thought leaders and experts in this area to encourage, promote and publish and implement industry standards guidelines and living frameworks around the ethical and humane use of technology. This incredible aspect of the Fourth Industrial Revolution was the way forward not just for our industry, but for humanity. We have to make sure that technology strengthens our societies, instead of weakening them. Technology needs to improve the human tradition, not undermine it. We’re looking forward to working with all of our Ohana and all of you in illuminating this important task together and continuing this incredible and critical discussion, especially here at Salesforce and including coming up at our Dreamforce conference. With that, I want to turn it over now to Mark Hawkins and to discuss the financial details of the second quarter.

Well, thank you, Marc. And as you’ve heard, we delivered a strong second quarter result across all our products and the regions. Second quarter revenue grew 27% in dollars and constant currency. While there was not a significant year-over-year FX impact to revenue, sequentially we saw $38 million revenue headwind due to FX. MuleSoft contributed $122 million to total revenue, net of purchase accounting adjustments. This was higher than we anticipated due to a higher mix of license revenue in the quarter. We’re very pleased with the MuleSoft’s performance to date. Dollar attrition exited the second quarter below 10%. Second quarter GAAP EPS was $0.39 and non-GAAP EPS was $0.71. Mark-to-market accounted for a strategic investment portfolio as required by ASU 2016-01, benefitted the GAAP EPS by approximately $0.18 and non-GAAP EPS by approximately $0.14 in the quarter. GAAP EPS also benefited by approximately $0.18 related to the partial release of our tax valuation allowance as a result of the MuleSoft acquisition. Operating cash flow was $458 million, up 38% over the last year, driven -- the overall strength we saw in the quarter, improving profitability and strong cash collections in Q2 were the drivers. Free cash flow, defined as operating cash flow less CapEx, was $288 million in the second quarter up 42% over last year. Unearned revenue ended the quarter at nearly $5.9 billion, up 24% in both dollars and constant currency. So, in revenue FX did not have a significant year-over-year impact on unearned revenue, but we did see a sequential FX headwind of approximately $66 million to unearned revenue in Q2. MuleSoft contributed approximately $77 million to unearned revenue in the quarter. As you may recall, in Q1, we started disclosing a new metric called remaining transaction price as part of our adoption of ASU 606. To conform with the emerging industry standard language, we have changed our terminology for the remaining transaction price to remaining performance obligation. At the end of the second quarter, our total remaining performance obligation was $21 billion, up 36% over last year. This metric represents all future revenues under contract. The current remaining performance obligation expected to be recognized as revenue in the next 12 months was $9.8 billion, up 27% year-over-year. Keep in mind the current portion of this metric is not impacted by invoicing duration unlike unearned revenue. Moving onto guidance. Let me briefly touch on the FX environment. As I mentioned previously, we experienced a sequential FX headwind to revenues. And we continue to see some movements in rates. In context, we are now anticipating an FX headwind to revenue of approximately $75 million to $100 million for the remainder of the year. Despite this FX headwind, we are raising our full year 2019 revenue guidance by $50 million to $13.125 billion to $13.175 billion or 25% year-over-year growth including MuleSoft. Speaking of MuleSoft, let me quickly touch on the revenue for the remainder of the year. We are were very pleased with the performance of MuleSoft in the second quarter. That said, as a significant portion of MuleSoft’s revenue is recognized upfront as license revenue under ASU 606 and as we have limited history in forecasting under this model, we are not updating our guidance for MuleSoft contribution to revenue. We will however continue to provide our quarterly revenue contribution for the remainder of fiscal 2019. Turning to operating margin. Based on our strong performance in the quarter, we are raising our FY19, non-GAAP operating margin improvement range to 25 to 50 basis points for full fiscal year non-GAAP operating margin of 16.75% to 17%. We are raising our FY19 GAAP diluted EPS guidance to $0.97 to $0.99 and non-GAAP diluted EPS guidance to $2.50 to $2.52. This guidance implies non-GAAP OIE of approximately 250 million for the full year. Keep in mind this guidance does not take into account any possible future impact from the mark-to-market adjustments related to ASU 2016-01, which may cause EPS volatility based on market conditions. We are raising our full-year fiscal 2019 operating cash flow growth guidance to 15% to 16% year-over-year. We also now expect full year CapEx to be 4% to 5% of revenue compared to our prior guidance of approximately 5%. For Q3, we are expecting revenue of $3.355 billion to $3.365 billion, GAAP diluted EPS of $0.01 to $0.02, non-GAAP diluted EPS of $0.49 to $0.50. We expect year-over-year unearned revenue growth of approximately 20% in Q3 including MuleSoft, our Q3 UR growth rate reflects significant FX headwind to unearned revenue year-over-year in addition to the continued deepening of our quarter on quarter seasonality of UR. As a reminder, we will only provide unearned revenue guidance one more time on the third quarter call at which point we intend to stop providing this guidance, as you will have more history with the remaining performance obligation metrics. As you update your models for the back half of the year, keep in mind that Dreamforce is in Q3 this year and was in Q4 last year. So, the associated costs will occur a bit earlier in FY19. To close, we delivered a strong second quarter closing out a great first half year, positioning ourselves very well for the back half of FY19 as we head into Dreamforce. We continue to execute on our strategy of delivering durable growth at scale with some leverage and are on track for our FY22 target of $23 billion. And speaking of Dreamforce, I look forward to seeing many of you at our Annual Investor Day on Wednesday September 26th. I want to say thank you to our employees, our customers, our partners and our shareholders for your continued support. And with that, I’d like to open up the call for questions.

Thanks, Jerome. You can queue up the Q&A for us, please.

[Operator Instructions] Your first question comes from the line of Bhavan Suri from William Blair. Bhavan, your line is now open.

Hey. Thank you for taking my question. Keith, congrats there. I wanted to touch on sort of a broader question here, given the Integration Cloud. Sort of starting to see a lot of this integration with ERP and into back office systems with MuleSoft. And you sort of verticalized the front end, Financial Cloud, Health Cloud et cetera. How are you thinking about tying that back end then? Is there sort of an idea of a supply chain cloud or something along those lines? Do you think about potential new verticals? How do you sort of capture some of the value of the data that you’re integrating with the ERP? I’d love to get sense how you guys are thinking about that.

Yes. Hi. This is Bret Taylor. It’s a really great question. I think one of the best opportunities we have from MuleSoft and our Integration Cloud is aligning it with our vertical solutions. If you look at what we’re doing with financial services and healthcare, it’s really about transforming the customer experience in the industry. And we can’t do it unless we unlock the data in this legacy system, whether it’s an electronic medical records or whether it’s the incredible amount of investments that the financial industry has made in their back office system. So, when we think about the opportunity from MuleSoft, it’s really about aligning with our overall value proposition, transforming customer experiences and upleveling the conversation of integration from an IT tactical decision to strategic decision about how to transform your customer experience. And that’s the opportunity that we see over and over again. We’re talking about integrating with our customers. It’s not just the problem for the CIO, it’s a problem for the CEO, and that’s the opportunity of integrating this value proposition.

Just to emphasize this point. This morning I received an email from the CEO of one of the largest banks in EMEA who wants to bring their entire executive team over to talk about the integration with MuleSoft could do to unlock their data. So, it’s a perfect proof point of exactly what Bret is talking about. There is huge opportunity in the space.

Can you just tell us how the integration is going...

We’re thrilled with the integration. As you know, it’s just our first quarter. And we’ve done many, many acquisitions here. I would say that this is probably the smoothest integration that we have. The integration with the field, the product teams, the marketing organizations across the board, all the lines of businesses has really, really been fantastic. And you can’t have a conversation right now with the customer, I was talking about MuleSoft. Everybody wants to talk about the importance of integration as it relates to digital transformation. So, we’re very, very optimistic.

Bret, you said kind of the acceleration of the public cloud combined with customers major investments in their own data centers is driving this Integration Cloud, or what do you see as the core driver?

There are so many trends happening simultaneously that is driving this investment and integration. We have customers who want to transform the customer experience. And they’re also lifting and shifting their infrastructure from their own on-premise data centers to the cloud. And every customer I talk to at scale public cloud, private cloud, on-prem, sometimes even mainframe systems. And they can’t wait for all that technology change to shift before transforming their customer experience. And that’s the promise of MuleSoft is we can actually transform it now. And that’s why the conversations that Keith mentioned are happening right now is all these trends are driving integration, sort of upleveling the discussion or negotiation to a strategic level.

Your next question comes from the line of Kirk Materne from Evercore ISI. Kirk, your line is now open.

Thanks very much and congrats on the quarter. And I’ll add my congrats to Keith on his new appointment. I guess, my one question and one follow-up for Mark Hawkins. I guess, just my question was around Marc some of your comments on deep learning and AI. I was just curious, how often Einstein is coming up in these engagements you’re having with CEOs. Is having an AI platform becoming really table stakes to participate in this digital transformation discussion? And then, just a quick clarification for Mark Hawkins. Mark, I assume the guidance you gave, I guess the FX headwind was [incremental][ph] relative to what you were thinking earlier, meaning it’s become a bigger headline since we last talked to you three months ago? Thanks.

Well, thanks so much for that question. I mean, it’s been quite a few years now that we made a strategic decision here that artificial intelligence had to be a core part of the Salesforce platform. Of course, we’re seeing so many exciting technologies emerge that we knew -- that had to become a part of our platform on our journey over the last 20 years. But, I think AI was probably the most daunting because there is many different aspects of artificial intelligence. And through a lot of core native development, through acquiring companies, refining incredible talents, we’ve been able to build a phenomenal platform with Salesforce Einstein. I don’t think that there is a more successful business implementation of artificial intelligence than Einstein. Not just core in our platform, but also now in all of our core clouds as well. I mean, you can see how Sales Cloud Einstein or Service Cloud Einstein or even the Marketing Cloud helps transform the customer experience. But probably the most powerful is our Commerce Cloud. When we actually turn Einstein on in the Commerce Cloud and customers have the option to do that, but when they did turn it on, they see double-digit revenue growth above what they were already experiencing on the Commerce Could is amazing. And it really goes to show how the ability to take this really powerful next generation technology can have dramatic business outcomes. And we’re deeply committed to artificial intelligence. And as I said, we’re also deeply committed to the ethical and humane use of that technology that we all realize that AI is developing a lot faster going a lot farther than any of us realized. And Salesforce, as I believe probably is the premier provider of artificial intelligence, certainly in business applications and enterprise applications, we still feel a deep responsibility to help with the guidance of that capability. Now, I’ll turn it over to Mark.

Kirk, you are correct. Yes, this is bigger since we talked prior and despite the FX headwind that we see that is affecting us in the second half, obviously, been raising our revenue, our operating margin and our cash flow.

Your next question comes from the line of Richard Davis from Canaccord. Richard, your line is now open.

Maybe just a broader question for Marc Benioff. Look, there are thousands of companies out there. As you and I both know, most of them hit a wall and often times the stumbling block is CEO who doesn't change with the company. So Marc maybe this will be a better question over a beer or whatever. But you and I have met a bunch of private companies, but it would be super helpful if you passed on one or two key things that you've done to scale as a CEO, because you've seen it that CEOs hold on too tight, they don’t do it that or the other but that would be actually another swansong question, but I was just curious. Thanks.

Well, it’s a good question and I’ll tell you in the room here is Monica Langley, and we're working on and you've probably read the book behind the cloud. And we're working on a new book right now, which we're really excited about. And we just thought one of the key chapters that really answer your question and still firmly believe that you're an entrepreneur that really the key to having durable success over multiple decades, which is what Salesforce have now done, is really to maintain in the beginners mind. You probably heard me talked about this, but rarely does a morning go by where I don't take some time for mindfulness myself, and really say okay now and everything that’s going on in the industry, in the world, in our company, with everything that’s happening, what do I want right now; to really start fresh, completely clear my mind; to really let everything go that has happened over multiple decades; and to say, okay, what do I want now; where are we going. And we do that -- I do that with myself and we do that also at our management team, we just finish one of our major management conferences; and we take that same approach where we really say, okay, what is that we really want; and I think that’s an incredible time; we're all still connected all the time, everything that’s going on, so much email; we're on our phones and for everyone on this call is looking down at their phone right now; and just put our phone down and stop and just say okay, well let's take a moment and then move forward. And I don’t think for my commentary other entrepreneurs, is they need to take care of themselves just a single month a quarter and then starts with their beginners mind. You can see that new book I assume hopefully, right Monica?

In one year.

In one year actually, all right.

Your next question comes from the line of Raimo Lenschow from Barclays. Raimo, your line is now open.

I just had a question Keith for you. Now that you have MuleSoft in for a little bit, what has been the feedback from the Salesforce? Because I am sure where you could say MuleSoft is a little bit more of a technical sale, but you guys also talked about that the whole discussion is to coming a lot more strategic. How has your sales force being able to take on MuleSoft and integrate it into the overall offering? Thank you.

So I would just characterize it this way, nearly universal euphoria. And if you think about the conversation that we're having at the CEO level, these are all about digital transformation. And the whole concept of integration just complete the thought and the promise of digital transformation again, by unlocking the data from these legacy systems. So MuleSoft already has a very, very capable and high-performing sales organization, which we continue to invest in. And we've been able to have very, very tight alignment enablement with the core Salesforce with the sales organization and that's just created lot traction. But again, if you think about the conversation and the dialogue that we're having with our customers, this is just one of a missing piece of the puzzle and we listen to our customers that's why we made this acquisition, because we knew exactly how important this is going to be to completing that digital transformation. So the integration is going very, very well the traction is there, the alignment is there, the synergies are there, the enablement is there. And the customers want this message, they want the store, they want the solution.

Bret, are you surprised that the rate of acceptance with the integration cloud and what's happening. I know you have a lot of surprised planned for Dreamforce around that as well. But is this a shock?

It's not a shock. For me when I look at our product portfolio and I don't view it in the separate products for separate clouds. I really view it as stages of customer lifecycle, customer touch points. And we're really saw an integrate it transformed customer experience. It just like automation and AI are in every conversation, because every company wants a more predictive smarter personalized experience with our customers. Every customer want that integrated experience that pulls together all the different departments, all the different legacy systems, provide an integrated view of the customer. We want every single person that addresses the customer to be able to have a single view of the personal topics view. And that's fundamentally what NeoSoft and our integration routes provide, it's relevant in every single customer conversation.

Your next question comes from the line of Keith Weiss from Morgan Stanley. Keith, Your line is now open.

I was wondering if we could dig in little bit to marketing cloud, we've seen a couple of quarters of acceleration there. Marc Benioff, on the last call you alluded to benefits that you expected to see from GDPR. Are we starting to see those benefits roll through, or is it too early for that and other things? And then maybe if I could sneak in a second question, I was just wondering about the decision to open source parts of the Einstein Data Framework. What was the rationale behind that, pushing that the open source community, what's the benefits you're expecting to see from that open sourcing of that technology?

Well, I think that number I mean, I would say it was last week in the conference and I met with more than a hundred of top European CEOs and probably each. And every conversation that I have with them, I see a deep yearning for them to have a more complete relationship with their customer. But it's a deeper aspect of that, they want a one-on-one relationship with their customer, especially consumer companies you can see that you look -- if you go to some of the major consumer sites that and companies that we work with like Louis Vuitton or Adidas or L'Oreal or Puma or New Balance, you can see that you're starting now one-on-one relationship with the company that they're able to really provide a one-to-one experience with you and that's not just in commerce, when it's in marketing, in conservative, in sales and to bring in from the previous questions, it's intelligence is that is we're using AI to make that a more personalized experience to give you that opportunity. And that's what every company wants to get to, whether they're a B2B company or a B2C Company. It's one of the reasons I'm so excited, for example, in the CloudCraze acquisition and a company like Adidas, they have significant percentage of course with their commerce is B2C. We all know that we go on their site and we buy or use these. But did you know that an even larger percentage of their electronic commerce is B2B that is of course they need to be able to go and sell to all the other companies that sell Adidas and we all know who those companies are. And that opportunity to offer a B2B and B2C experience, that's one-on-one that is really driving this phenomenal growth, especially you can see in the marketing side. Of course email is a key driver there and no one sends more business emails than in a highly personalized intelligent way than we do. You'll also see that it drove our acquisitions this quarter is Datorama. If you haven't seen Datorama, it is an amazing company. It's a company that through artificial intelligence it's automatically able to integrate all these different marketing automation applications. Of course, Salesforces is probably the number one marketing cloud in the world but there are other marketing clouds as well and there is other marketing technologies. Datarama is able to automatically reach out to those and then provide to the marketer automated dashboards and integrated KPIs to give them basically an incredible opportunity to drive their market, that is going to be future growth of our marketing plan. I am so excited and we're able to acquire this company and that we're able to rapidly start to integrate it into our system. Finally, you mentioned open sourcing, key part of our AI. We're working closely with the entire AI community. And as part of that, we believe that we're all working on artificial intelligence together. And we're certainly -- we've benefited from the open source community and we're going to contribute as well back to the open source community, that's part of our philosophy at Salesforce.

Your next question comes from the line of Heather Bellini from Goldman Sachs. Heather, your line is now open.

Marc Benioff, I just had a question about MuleSoft. You've obviously had great success from founding the company almost 20 years ago. But how do you see MuleSoft, if at all, helping to modernize your own internal IT and your clouds? And are there new offerings as a result of that that you envision you might be able to offer to customers as you do this? And then my follow-up is just related to, you've been very vocal about how great the IT spending environment is this year? And I'm just wondering, I know it's early but any reads from all the customers that you've done as you look up to next year? Thank you.

Well, I'll take the last part first, which is I've never seen such a robust spending environment. This is just the time when now to speak really to the CEO level, I've never seen CEOs spend so aggressively. They've benefitted really dramatically from these tax cuts and also from the deregulation focus, especially in the United States. And it doesn’t matter of its American or European as I mentioned out there last week, or an Asian CEO. I've had occurrences with all of them recently and I can tell you that across the board, I don't know a CEO who is not aggressively spending at a level that I have not seen them spend that before. And probably the number one thing that they're spending on is their own digital transformations. They are really positioning their companies for the future. I mean we're really in an incredible time and I have been continued to be extremely impressed with that. Of course, we have tremendous offering for them as well. We have the right product at the right time that is really helping. In regards to integration cloud, this is the company with MuleSoft that of course we help funding at the beginning. I personally recruited other investors like Cisco into the company board members I really always love the company. And them something amazing happened last year. I was just talking to a lot of customers and I keep hearing that integration was moving up on their priority list. And the reason why is very simple, everybody knows that public clouds are becoming more dominant. We've seen the incredible growth of amazing Salesforce customers like Amazon and Google, two of our largest customers and their public cloud. But as our customers move to these public cloud environments, including ours by the way, it really motivates the integration issue, because not only do they have their data in their data centers, but now they have data in multiple in most cases, public clouds, as well as they're getting data from other SaaS vendors and these another public data sources. All of these things created integration gambit like never seen before. And yet here this company MuleSoft that has a radically new API driven approach to integration that’s just phenomenal. And it's just been out, and of a sudden I turned to Keith and Bret and they know this, impact from one specific customer and I said, what, I mean we can offer our solution to the customer and provide an incredible 360 degree view of the customer and their customer for that customer, and give them insights like never before. But we are not going to be able to do that without this level of integration, because the customer their ability to have that 360 degree view of their customer is in so many different places now it's unbelievable. So Bret, do you want to just amplify or extent anything?

Yes, I mean if you think about the fourth investor revolution really is about the pace of technology change, increasing more rapidly than we've ever seen. And I think when I talked to CIs and CIOs the, main thing they're focused on the agility, how can we move our business more faster and keep pace with the changing expectations of our consumers and is constant concept of the API economy and breaking your company up into services and API so you can empower your business units to actually move faster than ever before is on everyone's mind. And we also have really amplified that strategy and really helps CEOs increase to fox speed of their digital transformation. And there is incredible opportunity, because the way they approach it's perfectly aligned with this concept of agility to become self-strategic in the fourth industrial revolution.

And Keith, I just have to ask you because obviously you've been here for five years, you've seen us to do lot of acquisitions. Has there ever been an acquisition that's has this rate of growth, speed and acceptance by customers that this one have that?

Well, we had a lot of great acquisition, as you know. I think that this one is very, very exciting and as it goes back to the comments that both of you, both you and Bret had made. If you think historically about what is going on in the world with the legacy debt, the processes that have built up over decades, the technology processes, the business processes. And then companies now more than ever because we are in the fourth industrial revolution and we have these amazing technologies, they has to be agile, they has to be Nimble. They have to reinvent themselves and driving business models. And if they can't get access to the data, if they can't leverage the strength of the data that is -- it's like an ocean of data then they will miss out on the opportunity. And you can think about offensive strategy if you're a CEO or a defensive strategy, but you must do something and that's what we're seeing in these conversations. So that's why I get excited about MuleSoft as I talk with customers and I know our employees as well, because this is really an opportunity to unlock that. So it's good as all these other acquisitions have been and they've been fantastic. I'm very, very excited about this and we're off to a great start. And you're going to see an incredible new reveal at Dreamforce, we're not going to stop these but Bret has done some amazing work, too.

Your next question comes from the line of Mark Murphy from JPMorgan. Mark, Your line is now open.

Keith, congrats to you on nice performance. Mark Hawkins, I wanted to ask you, MuleSoft contributed $200 million to the total RPO balance. And I am just curious if you're able to ballpark what it would have contributed to the current RPO balance if there was anything material. And then also for Keith and possibly Brett, we started to hear some feedback about underappreciated emerging jewels in the product portfolio. And in particular, those were references to commerce with CloudCraze and CPQ with SteelBrick. A couple of your partners are now saying that they've these three big focus areas of sales, service and marketing and that they're now going to have a fourth pillar in these areas. And sometimes they're seeing the contract values are increasing 20% or 30% when a customer adopts commerce and CPQ. So I just wanted to ask you. Do you see the ingredients for those products to supply it to the upside and possibly how that billion dollar multi-year potential?

So let me take a first one, thank you, Mark. In terms of RPO, you're absolutely right. In aggregate, there was $200 million that MuleSoft to our total deal, if you will. Wanted to share with you is the breakdown of that. We have about $100 million of that with the in the current RPO and obviously the $100 million will the non-current. So that's a little bit additional granularity that I can provide to you.

I think the success of our Sales Cloud and our Service Cloud our marketing plan is pretty amazing. The Sales Cloud growth is now $1 billion plus run rate, which is unprecedented marketplace. We've obviously seen great success with Service Cloud and Marketing Cloud. But all of this really speaks to our culture of innovation, whether it's our organic innovation or our cloud innovation. And I'm very, very close to the partner community and in the ecosystem. I mean, it's one of our free growth levers to have the largest ecosystem in the cloud. And we'd love the fact that our partners are investing in these elements of innovation. I mean, our partner certifications year-over-year are up 50%. I think that speaks volumes about their confidence in our solutions, whether it's in CPQ, whether it's in Commerce Cloud. All of these are solutions and this is a hand in glove conversation, these are solutions that are oriented around our industry focus, on their -- organized around our line of business focus. We are long gone from the days of focusing on single clouds. We are out there driving solutions, driving digital transformation and multi-cloud solutions and that's why you see the great result that we've seen in the quarter, which you saw in Q1 like you saw at the end of last fiscal year and why we're still talking about the second half of the year.

Your next question comes from the line is Ross MacMillan from RBC Capital Markets. Ross, your line is now open.

Thanks so much and my congratulations as well, and to you Keith on the new appointment. Maybe one for you Keith and just a follow-up for Mark Hawkins. Keith you mentioned Einstein I think in a numbers of descriptions of the major wins this quarter and CPG and airlines, et cetera. And I'm just curious as to how fast that's evolving. And are we getting to a point now where you're feeling more confident that Einstein is an incremental monetization opportunity for the company? And then I had a follow-up for Mark Hawkins. Thanks.

Einstein is -- it's an incredible product and we're just at the beginning here. It's an incredible piece of innovation. We put a lot of time and effort into this. We've got some amazing talented associated with it, and thought leadership and Bret's team is just done unbelievable job. And it is part of every dialogue because customers, no matter what industry, no matter what geography, what no matter what size of company, you are inside. And what I love about Einstein, I mean there's many things to love. But what I particularly love about Einstein it is applied with intelligence, lot of people talk about artificial intelligence in the without really having a scope or definition, of any boundary. And ours is real, it's tangible, it's pragmatic, it's practical. So it is something that’s applied to fantastic use cases whether it's in sales, services, marketing commerce it makes our conversations even more relevant. And our customers get even more value out of our existing product. So we drive more value, there is an opportunity to grow deal sizes, to extend relationships, to deepen relationships, and there is a long way to go. But boy, the results are, from a mind share perspective and early days on the money side and revenue side, we feel very, very good about where we're going here.

Your next question comes from the line of John DiFucci from Jefferies. John, your line is now open.

My question is for Keith. Keith, it sounds like the vertical businesses are doing very well they continue to do very well. And Salesforce, as an organization, hasn't been shy about standing up for just causes beyond the business at Salesforce.com. And I want to ask one question on one of these verticals and it's really the public sector. And according to what we hear the public sectors virtually sounds like it's been doing very well for a while here. I guess have you seen any recent impact on that business due to recent corporate activism by Salesforce.com? Just curious if that’s affecting that business at all.

Public sector is one of our strongest verticals. It continues to be one of our strongest verticals. Whether it's the United States government and UK government or any government in the world, they're charged to provide a higher level of service to their citizens. And that comes to the modernization of their legacy systems and using new technology like ours so that they can engage with citizens in an unprecedented way and that’s the truly fueling our growth. That business is very, very healthy and we support those organizations and their missions, and the results speak for themselves.

Your next question comes from the line of Terry Tillman from SunTrust Robinson. Terry, your line is now open.

Just one question, I know you guys tapped the idea of durable growth over time. What I'm curious about is if you look at the platform business and you back out MuleSoft, the platform business has just been chugging along in well over 35% growth. I guess, could you talk about maybe what's been driving growth more recently, in terms of is it just custom-built extensions off of your core cloud apps or ISV traction? Just wanting to double-click more into the strength of your platform business. Thank you.

So I’ll just answer this and Marc if you want to chime in, please do. But our core platform business is very strong and when you think about the capability around growth, you think about capability around the core platform, you think about shield, you think about analytics these are all growth drivers and difference makers to our customers, it just extend the platform. And we've had a great deal of focus and energy on this topic and we've executed incredibly well. So I think you're just going to continue to see that happen.

I’d just -- I totally echo that. I think things are -- it's really been exciting to be able to see that growth of addition and all the other things you had called out Shield, these are things that we're really getting even our ecosystem and what that contributing as well has been positive. And I’ll just add that at Dreamforce, you're going to see some amazing extensions to the core platform. We're not going to go just throw them right now, but I am sure you will be as well as way I am. You saw yesterday we also announced our lead band tour Dreamforce, which is Metallica but we have a lot of other amazing entertainment plan and speakers. Some of that we're going to be dribbling out as we've had between now and September 25th. And a lot of it you're going to see reveals for the first time during the Dreamforce keynote. I promise all of you that this will be the Dreamforce that you will all never forget. And I look forward to seeing all of you there. And with that…

Great. Well, thanks so much everyone for joining us today. If you have any further questions regarding our second quarter results, please feel free to email us at investor@salesforce.com. Otherwise, we'll look forward to seeing many of you at our Annual Investor Day, Dreamforce on September 26th. Thank you so much.

Thank you. And that concludes today's conference. Thank you all for participating. You may now disconnect.