Salesforce CEO Marc Benioff speaks at the World Economic Forum in Davos, Switzerland, January 18, 2024.
Halil Sagilskaya | Anadolu | Getty Images
sales force Shares soared 12% in after-hours trading Wednesday after the cloud software vendor reported earnings and issued guidance that beat Wall Street expectations.
The company’s performance against LSEG Consensus is as follows:
Earnings per share: Adjusted $5.90. It’s not immediately clear whether the reported earnings will match LSEG’s consensus of $3.27. Revenue: $11.35 billion vs. $11.32 billion expected.
Salesforce’s revenue increased 11% in the fiscal second quarter ended July 31 compared to the same period last year, according to the announcement. Net income was $3.53 billion, or $4.29 per share, an 87% increase from $1.89 billion, or $1.96 per share, in the year-ago period.
The company noted that it received a $2.6 billion gain from a strategic investment in equity in artificial intelligence startup Anthropic. Anthropic announced in May that it had raised equity funding that valued the company at $965 billion. Salesforce’s free cash flow increased 81% to $1.1 billion, well above the StreetAccount consensus of $643.2 million. In recent weeks, Alphabet and Microsoft have also made gains after investing in Anthropic.
Salesforce expects adjusted earnings per share to be between $3.42 and $3.44 for the fiscal third quarter, with revenue between $11.42 billion and $11.5 billion. Analysts polled by LSEG expected adjusted earnings per share of $3.38 on revenue of $11.41 billion.
Salesforce currently expects full-year revenue of $46.1 billion to $46.4 billion, which would mean an 11% growth rate in the middle of the range. The consensus for LSEG was $46.11 billion. Guidance in May had been for sales of $45.9 billion to $46.2 billion.
Also Wednesday, Salesforce announced a plug-in for Anthropic’s Claude that lets you compose emails, provide information, and update records through chat on behalf of sales reps.
During the quarter, Salesforce announced a $1.6 billion deal from the U.S. Department of Veterans Affairs and revealed plans to acquire customer service startup Fin for $3.6 billion. Salesforce expects the merger to close ahead of schedule in the third quarter of its fiscal year.
Annual revenue from Agentforce AI products exceeded $1.5 billion, up 240% year over year. The growth rate last quarter was over 200%. However, Robin Washington, Salesforce’s chief operating financial officer, said on an earnings call Wednesday that the company faced “headwinds and volatility” while selling licenses for its integration and analytics software.
Salesforce said it currently has $33.5 billion of performance obligations remaining, a measure of the revenue it expects to recognize next year. Analyst estimates compiled by Street Account were for $33.22 billion.
As of Wednesday’s close, Salesforce stock was down 22% since the beginning of the year, while the S&P 500 index was up 12% in the same period. Investors are debating how big a threat artificial intelligence-generated models are to fixed software companies.
“This is not SaaSpocalypse,” said Marc Benioff, co-founder and CEO of Salesforce. “We’ve been hearing about this for the past two quarters, dire predictions about the demise of software and how models will eat everything up, and none of that came true for us.”
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