(Bloomberg) — Salesforce Inc. gave an earnings forecast for the fiscal year that topped analysts’ estimates, trying to satisfy investors who have concerns over slowing sales growth at the software giant.
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Profit will be $10.03 a share to $10.11 a share in the year ending in January, compared with an earlier forecast of as much as $9.94. Analysts, on average, estimated $9.91. The company affirmed its fiscal-year revenue outlook of $37.7 billion to $38 billion.
Salesforce, the top maker of customer management software, focused throughout 2023 on expanding profit after grappling with multiple activist investors. More recently, Wall Street has been concerned about a slowdown in growth and is waiting to see when new initiatives, such as artificial intelligence features, will begin to lift sales.
“We continue to deliver disciplined profitable growth and this quarter, operating margins closed at record highs,” Chief Financial Officer Amy Weaver said in the statement.
Salesforce raised its annual forecast for adjusted operating margin slightly to 32.8%, compared with a previous forecast of 32.5%.
The shares rose about 3.5% in extended trading after closing at $258.90 in New York. The stock has declined 1.6% this year.
Many large software makers are struggling to show new revenue from AI products. At Salesforce, new higher-priced product tiers with AI are starting to help boost sales, but the contribution remains “pretty nascent,” said investor relations chief Mike Spencer in an interview.
Data Cloud, a product to organize information across the company’s business applications and other sources for analysis, has been touted by management as a way to tap into demand for AI features. Still, analysts are increasingly skeptical that the service is picking up steam among customers. Spencer said Data Cloud had “good momentum” in the quarter.
During a conference call after the results, Chief Executive Officer Marc Benioff unveiled new branding for the company’s AI tools, dubbing the digital assistants built on the emerging technology as “agents.” Benioff, other executives and analysts used the word “agent” more than 100 times on the call.
For example, AI “agents” will be able to help handle customer service requests at call centers, said Chief Operating Officer Brian Millham. A new product to manage the agents will be available in October.
Benioff said Salesforce’s new generative AI agents are more capable than those offered by peers or customers’ in-house solutions. “So many customers are so disappointed in what they’ve bought from Microsoft with Copilots — they’re not getting the accuracy in responses that they want,” he said, referring to Microsoft Corp.’s branded AI tools.
In the fiscal second-quarter, sales increased 8% to $9.33 billion, the company said Wednesday in a statement. It was the first single-digit revenue growth figure reported by Salesforce in its 20-year history as a publicly traded company. Analysts, on average, projected $9.23 billion.
Profit, excluding some items, was $2.56 a share, compared with an average estimate of $2.35.
The results showed signs of stabilization and small improvement, which is a good sign in a tough buying environment for software, said Anurag Rana, an analyst at Bloomberg Intelligence. “There is more pressure on your traditional software businesses at this point as clients are moving a lot more of their funding toward buying GPUs,” he said, referring to graphics processing units, the chips that power AI.
Salesforce also announced that Weaver is stepping down after four years as CFO. Weaver, who joined Salesforce in 2013, will remain in the post until the end of the fiscal year, then will help with the transition after her successor is named, the company said.
(Updates with comments from executives beginning in the ninth paragraph.)
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