Salesforce gives disappointing sales outlook, feeds AI fears
The company says that it expects “organic growth re-acceleration” in the second half of the year
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[SAN FRANCISCO] Salesforce gave a lukewarm outlook for sales growth in the new fiscal year, fuelling Wall Street’s worries that the software giant will lose out to new competitors in the age of artificial intelligence (AI).
Revenue will be about US$46 billion in the fiscal year ending in January 2027, the company said on Wednesday (Feb 25). The forecast was in line with the analysts’ estimates, but failed to impress investors.
Salesforce, the leading maker of customer management software, has become a poster child for Wall Street’s anxieties about the impact of AI on established vendors. The company’s shares have dropped about 37 per cent over the past 12 months as investors fear that AI will make it easier to build competing products and reduce Salesforce’s pricing leverage.
The shares declined about 3 per cent in extended trading after closing at US$191.75 in New York.
Still, the company said that it expects “organic growth re-acceleration” in the second half of the year.
“We are well on our way” to US$63 billion in annual revenue in fiscal year 2030, chief executive officer Marc Benioff said. That is ahead of the US$60.3 billion expected by Wall Street.
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Salesforce has been trumpeting its AI tool called Agentforce that can complete tasks such as sales development and customer service without human supervision. Annual recurring revenue for that product passed US$800 million in the fiscal fourth quarter, up from US$500 million in the preceding period, the company said.
Sales increased 12 per cent to US$11.2 billion in the period, which ended Jan 31. While that marked Salesforce’s most rapid revenue expansion in years, the growth rate was boosted with US$399 million in sales from the recently completed acquisition of data software company Informatica.
Revenue for the company’s two largest product lines – sales and service – increased 8 per cent and 7 per cent, respectively, when adjusting for currency fluctuations. Each was just short of Wall Street estimates.
Earnings, excluding some items, were US$3.81 a share, topping estimates.
Salesforce also announced a new US$50 billion stock buyback programme and increased its quarterly dividend to 44 cents per share. These steps are “reinforcing our commitment to delivering significant shareholder value”, said Robin Washington, the chief financial and operating officer. BLOOMBERG
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