Salesforce Shows AI Remains The Gist Of Tech Growth Stories
On Wednesday, Salesforce Inc (NYSE: CRM) topped estimates with its fiscal fourth quarter results. However, it also delivered a weak fiscal 2025 revenue guidance.
Fourth quarter highlights
For the quarter ended on January 31st, the business software maker reported revenue grew almost 11% YoY to $9.29 billion, surpassing LSEG’s estimate of $9.22 billion.
Although pofessional services revenue declined 9%, Salesforce started selling its products on the cloud marketplace of the e-commerce and cloud titan, Amazon.com Inc (NASDAQ: AMZN) during the quarter. The expansion of the strategic partnership between Amazon, the world’s leading cloud provider and Salesforce, the world’s leading CRM platform promises to unleash the power of connected clouds and AI technologies. The alliance between Amazon and Salesforce will undoubtedly help users around the globe to infuse the latest generative artificial intelligence technologies into their workflows. Being available on Amazon Web Services Marketplace gave Salesforce a big new channel as it continues its push towards a more profitable operating model that includes lowering its cost of sales. It will be interesting to see how will this partnership with Amazon continue to evolve.
For the quarter, Salesforce swinged to a profit as it reported a net income of $1.45 billion, or $1.47 per share while adjusted earnings amounted to $2.29 per share, topping LSEG’s estimate of $2.26. During last year’s comparable quarter, Salesforce recorded a net loss of $98 million, or 10 cents per share.
However, Amy Weaver noted that Salesforce has observed improved bookings growth over the past two quarters.
Fiscal first quarter outlook
Salesforce guided for revenue in the range between $9.12 billion and $9.17 billion, with adjusted earnings in the range between $2.37 and $2.39 per share for the current quarter.
Fiscal 2025 guidance
Salesforce guided for revenue in the range between $37.7 billion and $38 billion with adjusted earnings in the range between $9.68 and $9.76 per share. Wall Street expected revenue guidance to be a bit higher at $38.62 billion while its estimate of adjusted earnings of $9.57 per share was surpassed. Salesforce justified being more cautious with revenue guidance due to accounting for foreign-exchange pressure and continued weakness in professional services, along with a more measured buying environment which has been lingering in the air since fiscal 2023.
However, the guidance did not include the effect of AI products which are enjoying a strong demand, with internal AI adoption being expected to contribute to margin growth over time.
Salesforce did not put AI in the corner.
Just because AI investment still haven’t boosted Salesforce’s finances yet doesn’t mean AI is put in the corner. It is just that AI investments take time to play out. Earlier this week, Salesforce revealed its Einstein Copilot, while also teasing more AI innovations are coming in the near future as the AI revolution is underway, evolving at an extraordinary pace and it will affect everyone and everything.
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