Salesforce Inc (CRM) Q3 2025 Earnings Call Highlights: Record Margins and Strategic Growth …

Salesforce Inc (CRM) reports robust Q3 performance with record GAAP operating margin and strategic expansion of its AI-driven platform, Agentforce. Read More...

Revenue: $9.44 billion, up 8% year over year.
Subscription and Support Revenue: Grew 9% year over year.
Non-GAAP Operating Margin: 33.1%, up 190 basis points year over year.
GAAP Operating Margin: 20% for the first time in company history.
Non-GAAP EPS: $2.41, inclusive of a $0.18 charge from strategic investment adjustments.
Operating Cash Flow: $2 billion, up 29% year over year.
Free Cash Flow: $1.8 billion, up 30% year over year.
Remaining Performance Obligation (RPO): $53.1 billion, up 10% year over year.
Current RPO (CRPO): $26.4 billion, up slightly more than 10% year over year.
Share Repurchases and Dividends: $1.6 billion returned to shareholders in Q3.
Fiscal Year 2025 Revenue Guidance: $37.8 billion to $38 billion, growth of approximately 8% to 9% year over year.
Fiscal Year 2025 Non-GAAP Operating Margin Guidance: 32.9%, a 240 basis point improvement year over year.
Fiscal Year 2025 Operating Cash Flow Growth: Approximately 24% to 26%.
Q4 Revenue Guidance: $9.9 billion to $10.1 billion, up 7% to 9% year over year.
Q4 Non-GAAP EPS Guidance: $2.57 to $2.62.

Release Date: December 03, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Salesforce Inc (NYSE:CRM) reported strong financial performance with Q3 revenue of $9.44 billion, up 8% year over year.
The company achieved a non-GAAP operating margin of 33.1%, marking a 190 basis point improvement year over year.
Agentforce, Salesforce’s new AI-driven platform, closed over 200 deals in just one week, indicating strong market demand.
Salesforce’s Data Cloud was included in 8 of the top 10 deals in the quarter, showcasing its importance in AI transformations.
The company is expanding its workforce by hiring 1,400 account executives globally to meet the increased demand for Agentforce.

Despite strong performance, Salesforce Inc (NYSE:CRM) faces challenges with constrained growth in the United States and parts of EMEA.
The company anticipates a deceleration in license revenue growth for MuleSoft and Tableau due to tough prior-year comparisons.
Agentforce, while promising, is still in the early adoption phase and not yet a material contributor to CRPO.
Salesforce’s professional services business is expected to be a headwind to revenue growth.
The company is experiencing a slightly above 8% revenue attrition rate, consistent with recent quarters.

Q: On Agentforce, can you discuss the halo effect across product lines and the role of Data Cloud? A: Marc Benioff, CEO, highlighted that top customers are integrating multiple Salesforce products, including Sales, Service, Marketing, Analytics, Data Cloud, and Slack, into a comprehensive agent-first platform. This integration is unique to Salesforce, offering a complete suite that enhances customer interactions and operational efficiency.

Q: Can you provide details on the 200 Agentforce deals? Are they primarily upsells, and which clouds are involved? A: Brian Millham, COO, explained that the initial 200 deals were largely add-ons to Service Cloud, Salesforce’s largest cloud. However, the potential extends to Sales Cloud, Marketing Cloud, Commerce Cloud, and Data Cloud, indicating a broad opportunity for Agentforce across various platforms.

Q: How are you approaching pricing for Agentforce, and what feedback are you receiving from clients? A: Brian Millham, COO, stated that Agentforce uses a usage-based pricing model at $2 per conversation, which is cost-effective compared to traditional labor costs. Customers appreciate the value, especially in managing customer interactions efficiently.

Q: Can you elaborate on the More Core initiative and its impact on the platform? A: Marc Benioff, CEO, described More Core as an effort to integrate all Salesforce applications into a single platform, enhancing AI capabilities. This integration allows seamless operations across sales, service, marketing, and more, providing a comprehensive solution for customers.

Q: How prepared are customers with their data to leverage Agentforce effectively? A: Brian Millham, COO, noted that readiness varies. Customers with strong data strategies can quickly integrate Data Cloud and Agentforce, while others may take longer to harmonize siloed data. The demand for data harmonization is high, as it enhances AI and Agentforce capabilities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.