Salesforce investors hope for faster growth, AI progress in earnings
Marc Benioff, Founding Partner and CEO of Salesforce, joins the 50th World Economic Forum in Davos, Switzerland on January 21, 2020.
Denis Balibouse | Reuters
There was a moment in 2020’s Pandemic Fuel Growth Days, Salesforce transcendental Prophecy with market value. Marc Benioff finally overthrew his mentor Larry Ellison.
That moment went a lot.
Salesforce’s stock price fell by 25% this year, the worst performance in large cover technology and the second best decline in Dow, just defeating Unitedhealth. In the meantime, Oracle increased by 34%, performances better than most of its peers, and left behind the main indices.
The two companies, which were once with valuation, are now divided into about 400 billion dollars. Oracle is worth $ 630 billion and Salesforce fell to $ 239 billion. Ellison is now second behind Elon Musk. Bloomberg Billionaire IndexWith a net value of 278 billion dollars. Benioff ranks 10.4 billion dollars.
Investors are eager to hear how Benioff plans to correct the ship when Salesforce reports reveal the three -month results after the closing on Wednesday.
The company is a single -digit growth for four flat quarters, as customer relationship management software takes into account the difficulties of saturation in the key market. According to LSEG, this line is expected to continue, and analysts estimate the increase in income to 8.7 to 10.1 billion%.
In April, about one quarter of Salesforce’s 9.3 billion dollar subscription and support revenue came from products related to customer service, the largest category. The company charges the service cloud offer according to the number of intermediaries using the software.
With the rapid rise of artificial intelligence, some analysts will pose a risk for Salesforce, estimating more investigations through automation.
Benioff is aware of the challenge. In June, AI already discussed about 30% to 50% of the company’s work. A great reason for Salesforce reported Earlier this year, he cut 1,000 jobs.
In the case of customers, Salesforce now sells AgentForce, an AI system to respond to customer support requests. After being launched in October, AgentForce said that he gave an annual $ 100 million revenue, in a conference meeting in Mayoff in May.
“Considering the scale, it is not important enough to move the needle on this work,” Wells Fargo analyst Michael Turrin, who advised Salesforce shares. He said.
Umut is that customers pay more than the service cloud for agentforce.
The biggest difference for Oracle is that it is one of the first beneficiaries of the AI explosion. First of all, Oracle, known for its database software in large companies and state institutions, has determined cloud infrastructure commitments from Openai and Musk’s Xai.
If AgentForce wins traction, Salesforce may have a window for AI business.
“I think there is a lot of disappointment in Salesforce’s stock performance, so I think that investors are trying to figure out if there is an opportunity for a little rebound.” He said.
Looking for double -digit growth
Investors also want to improve the existing performance obligations in the fixed currency, which is a measure of the expected income next year. In May, Business Chief Robin Washington said he expects this number to be 9% for the August quarter.
“If metric remains more than 10%, this business is at least 10% growth profile for next year.” He said.
According to LSEG, analysts expect income growth to increase very slightly in the third quarter, and Consensus forecasts are currently at 9%.
Salesforce refrained from commenting.
Expansion can come from outside. In May, Salesforce agreed to buy data management company INFORMATICA 8 billion dollars. This is the biggest agreement for Salesforce since the purchase of 27.1 billion dollars in 2021. Meanwhile, Salesforce had not spent more than $ 2.5 billion for M & A, a large growth driver over the years.
At the end of 2022, after Salesforce, activist investors began to be satisfied with the high -cost acquisition of Benioff, the company’s low -performance stock, and the expanding labor force. The activists began to agitate for a more positive sales and profit mixture, and Salesforce responded by expanding the margins in a shorter time than they planned.
The starboard value, one of the main provocates, has returned for more. In the second quarter, the first company that bought Salesforce shares in 2022 filing. In October 2024, Jeff Smith from Starboard complimented Salesforce’s profitability improvements, but he still believes that there was a lot to go.
Vulcan Value Partners is a comfortable Salesforce shareholder in the plans of the software company. After receiving a share in 2020, Vulcan added 345,000 shares in the second quarter and increased its total shares to $ 300 million.
“What we focus is worth the share of the business.” He said. “This continues to grow.
According to LSEG, analysts expect to rise from $ 2.56 in the previous quarter to $ 2.78 in the last quarter.
In 2020, Vulcan sold Oracle shares and kidnapped at a steep rally. Simmons said he would buy it again if the stock is discounted.
“It’s funny for things to come around,” Simmons said. “Benioff starts Salesforce as a cloud domestic business company, and Larry is trying to put his in -house customers into the cloud in Oracle.”
