This ain't no party, this ain't no disco, this is artificial intelligence, baby, and this ain't no fooling around.
As CEO of Salesforce (CRM) , Marc Benioff has seen his share of patchwork AI and he's none too pleased.
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The enterprise software company has been ramping up its investment in AI technologies and Benioff told analysts that "AI is not only my top of mind, it is the top of mind for every customer, for every CEO, for every CIO."
"I think that there's a lot of misconceptions about AI with my customers," he said during the company's second-quarter-earnings call. "I have been very disappointed with the huge amount of money that so many of these customers have wasted on AI. They are trying to DIY their AI."
"It's not selling like when we first saw cloud emerge or even some other technologies, where they feel like they have to roll their own, build it themselves, get in the weeds, try to figure out and they're not going to do it better than we're going to do it." he added.
And there comes a moment, Benioff said, when customers realize that they don't have take the do-it-yourself approach with AI.
Salesforce CEO: 'we're operating at this incredible scale'
"You can use a platform like Salesforce to get the highest efficacy of artificial intelligence, the best capability to fully automate your company, achieve all of your goals and you can do it with professional enterprise software," he said.
Multicloud deals accounted for close to 80% of the company's new business in the quarter, Benioff said, "and we're just operating at this incredible scale."
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During the call, Benioff thanked departing President and Chief Financial Officer Amy Weaver, who, he said, "spearheaded our financial transformation."
Weaver will remain at the company as CFO until a successor is appointed and after that will stay on as an adviser.
"It has been an incredible 11 years for all of us who work with Amy," Benioff said.
Salesforce, a Dow component since 2020, earned an adjusted $2.56 a share in the second quarter, up from $2.12 a share a year earlier and beating the consensus estimate of $2.36 a share.
Revenue totaled $9.33 billion, up 8% from a year earlier and topping Wall Street's call for $9.23 billion in sales.
Salesforce estimated adjusted fiscal third-quarter earnings at $2.42 to $2.44 a share on $9.31 billion to $9.36 billion in revenue. Analysts expected $2.43 and $9.41 billion.
At last check Salesforce shares were off slightly at $256. The stock is off 2.8% year-to-date and up 20.7% from a year ago.
TheStreet Pro's Versace weighs in on Salesforce
TheStreet Pro’s Chris Versace said Salesforce “talked about signing a massive number of AI product deals. I believe the number was around 1,500 deals in the quarter alone, simply huge."
“They also commented that their bookings were about double, quarter over quarter,” he said. “So, this tells us that the enterprise is embracing AI. If you remember, several weeks ago, there was a lot of concern about that.”
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Salesforce posted disappointing earnings in May. But Bank of America Securities analysts said the current results "suggest Q1 was just a hiccup" as they boosted their price target on the company's stock to $325 from $316 and reiterated their buy rating.
"Q2 results and outlook suggest to us that Salesforce is back on track to deliver steady, sustained low-double-digit growth with potential for some reacceleration from an improving macro and contribution from AI," the firm said.
Analyst Ives: results 'huge step forward'
"Coupled with solid 150-200 basis point margin expansion annually, Salesforce is emerging as the next quality [growth at a reasonable price] stock in software," B of A said.
The investment firm noted that Weaver's departure is "a negative, given her track record managing restructuring efforts and [Wall Street], though the fact that she will remain on through FY25 provides comfort for a smooth transition."
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Wedbush analyst Dan Ives maintained his outperform rating and $315 price target, telling investors that “CRM delivered its July results, which were above [Wall] Street expectations on the top and bottom-lines and provided solid October guidance in a bounce-back quarter that was a huge step forward for Benioff & Co."
"While still battling through various headwinds in a choppy backdrop, this was a much-needed bounce-back quarter with CRM making major strides in the field around monetizing AI across its massive installed base while generating solid bottom-line expansion," Ives said.
The analyst mentioned Salesforce’s new Agentforce AI platform, which is “aimed at reimagining enterprise AI to augment employees, enforce productivity, and drive profitable growth.”
"With the goal of building high-quality and accurate enterprise agents focused on trust, innovation and driving results built on top of CRM’s data cloud acting as the AI transformation’s foundation," Ives said, "more customers are finding it easier to deliver accurate AI while delivering functionality, improved capabilities, and high-level accuracy."
Bernstein raised its price target on Salesforce to $236 from $234 and affirmed an outperform rating on the shares.
Salesforce delivered a decent second quarter with small beats against modest consensus expectations and in-line guidance. But the real story is that this quarter did not prove either the bull or the bear thesis, the investment firm said.
Bernstein is "impressed" with management's ability to drive substantial margin improvement, with Salesforce now delivering margins in line with many of its more traditional peers, and further upside is limited.
However, the longer-term revenue-growth question remains unanswered one way or the other, the firm added.
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