Salesforce CEO on sales robots, the downsides of Microsoft AI, and the big wins

A comeback quarter for Salesforce (CRM).

Shares of the SaaS company fell 4% in after-hours trading on Wednesday as it beat Wall Street estimates for sales, operating margins and earnings.

The reaction — and the tone surrounding the quarter’s performance — is in stark contrast to just three months ago, when the company shockingly missed sales estimates for the first time since 2006.

Demand remains strong and there are “big targets” for operating margins and cash flow, Salesforce co-founder and CEO Marc Benioff told me on Yahoo Finance.

Sales were up 11% in Europe and 16% in Asia-Pacific on a constant currency basis. The company’s Americas segment posted sales growth of 8%.

“I don’t think anybody expected a repeat performance (last quarter),” Third Bridge analyst Charlie Miner told Yahoo Finance.

Miner added: “What I think a lot of people are excited about right now is the pace of adjusted operating margin. Profitability has completely become the focus for Salesforce over the last six quarters, you can’t miss there right now, especially when (sales) growth is down to single digits for only the second time in their company’s history.”

The company maintained its full-year sales outlook but raised its expectations for operating margins. This may fuel excitement that Salesforce’s various AI initiatives will increase profits.

To that end, Benioff teased the upcoming release of AgentForce, which includes AI sales agents that go beyond chatbots and can solve customer questions. Benioff says more details will be shared in September at the company’s closely watched Dreamforce conference.

But he tells me that service is a higher margin opportunity and will be evaluated through conversation. Benioff predicts one billion agents in service by the end of fiscal year 2026.

He also says Microsoft has “misled” customers “that they have to do so much of the heavy lifting on the tech side.” Salesforce aims to allow customers to train their models within its platform.

“They’re getting real value from AI now,” he says of Salesforce’s offerings.

“One of the biggest initiatives in the field is monetizing the theme of AI within Salesforce’s massive installed base. We believe this is a major land grab opportunity that could significantly benefit Salesforce in the coming years and grow total revenue by more than $4 billion annually on our estimates and groundwork through 2025,” wrote Wedbush analyst Dan Ives in a client note.

Rollover of earnings

• Net sales: $9.33B (+8% YoY) vs $9.23B Estimate (Guidance: $9.2B to $9.25B

• Current Remaining Performance Obligations: $26.5 billion vs. $26.31 billion

• Adjusted operating margin: 33.7% vs. 31.94% estimate

• Diluted EPS: $2.56 (+21% YoY) vs. $2.35 estimate

The story continues

What else caught our eye: the perspective

• Sales guidance for the full year: $37.7 billion to $38 billion vs. estimate of $37.84 billion (previous guidance: $37.7 billion to $38 billion)

• Full-year operating margin guidance: 32.8% vs. 32.52% estimate (previous guidance: 32.5%)

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Brian Sozzi is the executive editor of Yahoo Finance. Follow Sozzi on X @BrianSozzi and further LinkedIn. Advice on deals, mergers, activist situations or anything else? Email [email protected].

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