In a significant development for the tech sector, business software titan Salesforce has reported quarterly financial results that surpassed market expectations. This performance provides CEO Marc Benioff with crucial leverage to counter mounting investor concerns over the company's substantial and aggressive investment in artificial intelligence (AI).
Strong Numbers Amidst a Cloud of Doubt
For the quarter ending in October, the San Francisco-headquartered company announced a net income of $2.1 billion, which translates to $2.19 per share. This figure represents a substantial 37% jump compared to the same period last year. The company's revenue also saw healthy growth, climbing 9% to nearly $10.9 billion. Furthermore, Salesforce issued a forecast for the current quarter that also exceeded the predictions of Wall Street analysts.
Despite this earnings beat, the reaction in the stock market was notably modest. This tepid response underscores the persistent climate of skepticism enveloping the broader technology industry. Investors have become increasingly nervous about the hundreds of billions of dollars being funneled into AI infrastructure without clear, immediate signs of a proportional financial return.
Salesforce Feels the AI Pressure
Salesforce has been acutely affected by these "AI jitters." Prior to the earnings announcement, the company's market valuation had plummeted by 35% from its peak of $369 per share a year ago. This dramatic decline erased roughly $125 billion in shareholder wealth. The volatility is not confined to Salesforce; even industry bellwether Nvidia, whose chips power the AI boom, has seen its stock remain 15% below its late October peak, despite also posting stellar earnings recently.
On a conference call with analysts, Benioff, who co-founded Salesforce in 1999, spent 25 minutes outlining his vision. "We're uniquely positioned for this new era," he asserted. He described the company's new AI technology as creating "wow" moments for its customers. Following the report, Salesforce shares initially jumped more than 5%, but gains were trimmed to about 2% after Benioff's presentation.
The Big Bet on "Agentforce" and Adoption Challenges
Central to Salesforce's strategy is "Agentforce," a comprehensive suite of AI agents engineered to automate various customer sales and support tasks. The company's commitment to this path was starkly illustrated by its recent decision to lay off 4,000 of its own customer support employees as its AI tools assumed those responsibilities.
However, the uptake of this technology by corporate clients has been slower than many investors had hoped. Jay Woods, Chief Market Strategist at Freedom Capital Markets, noted to the Associated Press that Salesforce has become a "poster child" for the doubts clouding AI, as customer adoption lags behind the rapid pace of innovation. Benioff acknowledged this gap on Wednesday, stating, "We all know that the speed of innovation has exceeded the speed of customer adoption," but predicted a shift as more organizations integrate AI into their workflows.
Looking ahead, Benioff reaffirmed ambitious long-term growth targets, projecting $60 billion in revenue for the fiscal year ending in January 2030. To achieve this goal, Salesforce must maintain average annual revenue growth of approximately 10% from its current fiscal year forecast of $41.5 billion. The company also recently bolstered its data management capabilities by completing an $8 billion acquisition of Informatica, a software firm that builds AI tools for handling corporate data. "We're continuing to execute on the path to our $60 billion dream," Benioff concluded.
