(Bloomberg/Brody Ford) – Salesforce Inc. is projected to have low quarterly sales growth, suggesting that artificial intelligence products are still not being rewarded quickly in the face of competition with emerging AI companies.
The company said in a statement that revenues will range from $10.2 billion to $10.3 billion for the period ending in October. Analysts estimated an average of $10.3 billion. The current remaining performance obligation is a measure of booking, increasing “slightly” by 10% in line with the analyst average forecast.
Investors are increasingly worried about the current software maker reaching new AI-based vendors. Companies like Salesforce, which create apps that are billed per user, face the most steep skepticism due to the view that it will take over some of the tasks it provides and reduce the customer's workforce.
“Investors need to look at qualitative Agent Force numbers and raise enthusiasm to wait for next month's Dream Force meeting,” Barclays analyst Raimo Renshaw wrote in a note after the results.
Salesforce is trying to get clients to use the AgentForce AI tool. This allows you to complete tasks such as sales development and customer management without human supervision. The company said it launched its product later last year and has since shut down more than 6,000 paid transactions. In May, Salesforce said the tool had $100 million in annual recurring revenue. The company did not update that figure on Wednesday.
It takes time for large businesses and regulated industries to feel comfortable implementing AI tools, Chief Financial and Executive Officer Robin Washington said in an interview after the results were released. Salesforce added more pricing options and hired additional salespeople to help with fuel adoption, she said.
Stocks fell about 6.8% in early trading on Thursday before the market opened in New York. Shares fell 23% until the end of Wednesday, as “AI confusion stories grow loudly,” wrote Keith Weiss, analyst for Morgan Stanley, in a note before the results were announced.
Despite investor concerns, CEO Mark Benioff was keen on the future of AgentForce products.
“We've seen a quarterly 60% increase in customers who have moved from pilot to production. They're expanding use cases and scaling consumption. This is just the beginning of the most transformative time in our industry,” Benioff said in a conference call with analysts. “I have never been more excited about my entire career.”
Still, the first question from analysts during Wednesday's revenue call was about potential confusion from AI. Kash Rangan, an analyst at Goldman Sachs Group Inc., asked how the subscription software business model known as Software-as-a-Service or Saas can be defensive.
“There's this strange story where somehow there's no Enterprise Saas or apps or anything like that,” Benioff said. “Now I don't think there's anything that lasts forever, but I'm looking at how I run my business and my clients' businesses. I don't know what the alternative is.”
In the second quarter, Salesforce reported revenues increased 9.8% to $10.2 billion. The remaining performance obligations currently rose 11% to $29.4 billion. The profit except for some items was $2.91 per share. Analysts estimated $2.78 per share of revenues on $10.1 billion, according to data compiled by Bloomberg.
The company's data cloud and AI segment annually recurring revenue was $1.2 billion. The company also announced it would add $20 billion to its existing stock repurchase program, increasing its approved total to $50 billion.
During the call, Benioff said Salesforce would spend more time developing products for information technology services management. This could lead the company into a more direct competition with ServiceNow Inc., which specializes in this category.
In May, Salesforce said it would acquire data-centric software company Informatica Inc. Trade should close in the quarter that ends in January 2026 or immediately after that, Washington said by phone.
(Update pre-market transactions in the seventh paragraph.)
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