(Feb 27): Salesforce Inc gave a strong outlook for long-term sales and announced a large share buyback, helping assuage some of Wall Street’s fears about artificial inteligence (AI) disruption of the software industry.
“We’re well on our way” to US$63 billion in annual revenue in fiscal year 2030, chief executive officer Marc Benioff said on Wednesday in a statement. Wall Street was expecting US$60.3 billion. The company also announced a new US$50 billion stock buyback programme and increased its quarterly dividend to 44 cents per share.
Salesforce, the leading maker of customer management software, has become a poster child for Wall Street anxieties about the impact of AI on established vendors. The company’s shares have dropped sharply over the past 12 months as investors fear that AI will make it easier to build competing products and reduce Salesforce’s pricing leverage.
“People think SaaS is dead, which really isn’t the case,” executive vice president Mike Spencer said in an interview, referring to software as a service. “We don’t see that in customer commitments,” he said, adding that the company had record bookings.
Revenue will be about US$46 billion in the fiscal year ending in January 2027, the company said. The forecast was in line with the analysts’ estimates. Salesforce said it expects “organic growth re-acceleration” in the second half of the year.
Salesforce shares climbed as much as 3.9% after trading got underway in New York on Thursday. The earnings results initially drew a poor reaction from investors. Salesforce “delivered a good, not great F4Q, and in line FY27 guide so seeing a "meh" reaction in the pre-market seems about right,” wrote Kirk Materne, an analyst at Evercore ISI.
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 in the statement.
See also: Baidu sales down for third straight quarter on weaker AI business
Benioff said recent products the company has launched targeting IT service management and life sciences are attracting major customers from competitors including ServiceNow Inc and Veeva Systems Inc.
Sales increased 12% to US$11.2 billion in the three months 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% and 7%, 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.
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