Salesforce Inc. (NYSE: CRM), a leader in customer relationship management software, recently posted strong financial results for the third fiscal quarter, supported by its strategic focus on artificial intelligence (AI). The results exceeded Wall Street expectations, boosting investor confidence while leading to a rise in share price of around 10% at the close of regular trading[1].*
Highlights of Quarterly Results
For the period ended October 31, Salesforce reported revenue of $9.44 billion, up 8.3% year-over-year and beating analysts' estimates of $9.35 billion. Adjusted operating margin came in at 33.1%, beating estimates of 32.2% and confirming the company's continued focus on increasing profitability. Adjusted earnings per share were $2.41, slightly below expectations of $2.44, which was impacted by losses within the investment division of Salesforce Ventures.
Projected revenue for the current quarter ending in January is in the range of $9.9 billion to $10.1 billion, which is in line with market expectations. The order book, as measured by current outstanding performance commitments, is expected to grow by 9%. [1]
Artificial intelligence
Salesforce's strategic focus on artificial intelligence, highlighted by the October launch of Agentforce, has generated significant enthusiasm in the market. Agentforce uses AI to autonomously perform tasks such as customer support and sales development, with the cost per agent conversation starting at $2. This innovation allows Salesforce to take advantage of the growing demand for AI in business processes.
CEO Marc Benioff expressed strong confidence in Agentforce and announced plans to hire 1,000 employees to support its sales, following a period of cost and job cuts. Executive Vice President Mike Spencer said the company has already entered into a "good number" of Agentforce-related deals, but those deals are in their early stages and their impact on financial results will only be felt later.
Market reaction
Salesforce shares hit a high of $368 in over-the-counter trading, strengthening significantly from a low of $212 in May. The stock has rallied by more than 50% since this low, thanks to optimism associated with the AI strategy.*
Challenges of other divisions
Despite its overall success, Salesforce has shown slower growth in its affiliate divisions. Mulesoft's revenue grew by only 1% in constant currency compared to 13% in the previous quarter. A similar slowdown was also recorded by the Slack and Tableau divisions. On the other hand, the marketing and e-commerce division grew by 8%, slightly above Wall Street's expectations.
However, Commerce Cloud faces increasing competition from Canadian software vendor Shopify Inc., which claims to have acquired hundreds of Salesforce clients. This highlights the challenges that Salesforce faces in maintaining its dominant position in various markets.
Looking to the future
Salesforce's results indicate a company in transformation that balances short-term profitability with long-term growth thanks to AI-powered innovation. While challenges persist in certain business segments, Agentforce's strong adoption and its potential to transform business processes provide a compelling growth story.
For investors, Salesforce represents a combination of steady revenue growth, improving margins, and an aggressive AI strategy that prepares the company well for the future. Planned hiring and continued focus on innovation indicate that Salesforce is ready to take advantage of new opportunities in the market.
* Past performance is not a guarantee of future results.
[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which is subject to change. Such statements are not a guarantee of future performance. They involve risks and other uncertainties that are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.
https://finance.yahoo.com/news/salesforce-posts-strong-revenue-promise-215130055.html
[1] Salesforce stock price performance over the past five years: https://tradingeconomics.com/crm:us
