Salesforce.com (CRM.US) reported quarterly earnings that surpassed expectations, yet its stock experienced a significant decline in after-hours trading on Wednesday. The drop was driven by a new fiscal year sales outlook that failed to impress investors, intensifying market concerns that the established customer relationship management software leader may be losing ground to newer competitors in the artificial intelligence (AI) era.
The company forecasted revenue of approximately $460 billion for the fiscal year ending January 2027. While this projection was largely in line with analyst estimates, it did not generate market enthusiasm. Following the earnings release, the company's stock fell more than 5% in extended trading.
For the fourth quarter ended January 31, Salesforce.com reported revenue of $11.2 billion, a 12% year-over-year increase, slightly exceeding market expectations of $11.18 billion and marking its fastest growth rate in two years. Adjusted earnings per share were $3.81, significantly higher than the consensus estimate of $3.04. Meanwhile, the metric for contract value expected to be recognized as revenue within the next year—Current Remaining Performance Obligation (CRPO)—reached $35.1 billion, above the anticipated $34.53 billion. However, this growth was partly aided by the recent acquisition of data software firm Informatica, which contributed $399 million in sales.
After adjusting for currency fluctuations, revenue growth for the company's two core business lines—sales and service software—was 8% and 7% respectively, both slightly below Wall Street's expectations. As a leader in customer management software, Salesforce.com has become a focal point for Wall Street's anxiety about how AI might impact established software vendors. Over the past 12 months, the company's stock has fallen approximately 37%, as investors worry that AI technology could lower barriers to entry, making it easier to develop competing products and thereby eroding Salesforce.com's pricing power.
In response to the challenges and opportunities presented by AI, Salesforce.com is making a significant bet on its AI platform, Agentforce. This tool can perform tasks like sales development and customer service without human supervision. The company disclosed that the product's annual recurring revenue exceeded $800 million in the fourth fiscal quarter, up from $500 million in the previous quarter. However, analysts note that amid broader concerns about AI potentially disrupting traditional Software-as-a-Service (SaaS) business models, Salesforce.com needs to demonstrate it is translating early AI advantages into broader enterprise applications. "Salesforce.com must show the market how customers are moving AI agents from pilot projects to full-scale production," said Rebecca Wettemann, CEO of industry analyst firm Valoir.
Despite market worries, the company provided an optimistic short-term outlook. It expects first-quarter revenue between $11.03 billion and $11.08 billion, with adjusted earnings per share of $3.11 to $3.13, both exceeding analyst forecasts. The company also projected full-year revenue growth of 10% to 11% and anticipates a reacceleration of "organic growth" in the second half of the year.
Furthermore, facing a sustained stock decline—down about 28% year-to-date—Salesforce.com announced a new $50 billion stock repurchase program and increased its quarterly dividend to 44 cents per share. The company stated these moves "reinforce our commitment to creating significant value for shareholders." CEO Marc Benioff directly stated on the analyst call that the buyback was initiated because "the price is low right now." The company also disclosed that its investment in AI startup Anthropic generated an $811 million gain this quarter and that it has made additional investments, now holding an approximate 1% stake.
Benioff emphasized in a statement that the company is steadily progressing toward its goal of achieving $63 billion in annual revenue by fiscal year 2030, a figure higher than the previous target of $60 billion and exceeding the current Wall Street expectation of approximately $59.07 billion. Benioff cited agent AI as one of the drivers for this growth. Analysts at Morgan Stanley maintained a "Buy" rating on Salesforce.com, noting in a report that discussions with partners indicate the rollout of its AI business "is still in the early stages."