Salesforce shares slip as investors worry about light AI returns - WSJ

Salesforce shares slip as investors worry about light AI returns - WSJ

Salesforce's shares fell by 6% to $242.26 in after-hours trading following the company's second-quarter earnings report. Despite reporting higher-than-expected revenue and profit, investors expressed concern over the light returns from the company's artificial-intelligence (AI) investments. Historical context from past earnings events reveals mixed short-term performance: a 3-day win rate of 40.00% and a 10-day win rate of 26.67%, but a higher 30-day win rate of 40.00%. This suggests that while earnings releases often trigger volatility, the stock has historically shown a greater likelihood of recovering gains over longer time frames.

The customer-relationship management (CRM) platform reported revenue of $10.24 billion for the second quarter, which was $10.29 billion as per Wall Street estimates. Adjusted earnings guidance was in line with estimates. However, Salesforce's stock has been down 23% this year.

Salesforce executives emphasized their focus on AI investments, particularly the Agentforce assistant, which launched last October. Since its debut, over 12,500 Agentforce deals have closed, with about 6,000 currently paid. Some investors are getting anxious about when these investments will show up as returns on Salesforce's balance sheet.

Melissa Otto, head of research at S&P Global Visible Alpha, noted a sense of frustration in the market. Analysts on Wednesday's call asked management how it could compete with AI-native apps and custom-built AI. Chief Operating and Financial Officer Robin Washington responded by saying Salesforce was doubling down on innovation and developing strategies on pricing and launching new services.

Data-cloud and AI annual recurring revenue was $1.2 billion in the second quarter. Salesforce also increased its share-buyback program by $20 billion, bringing the total to $50 billion. Chief Executive Marc Benioff said the company would consider using the funds for acquisitions.

Revenue rose 10%, to $10.24 billion. Salesforce had a profit of $1.89 billion, or $1.96 a share, up from $1.43 billion, or $1.47 a share, a year earlier. Adjusted per-share earnings were $2.91, ahead of the $2.78 anticipated by analysts.

Salesforce expects $41.1 billion to $41.3 billion in revenue for this fiscal year. Adjusted earnings per share are projected to be $11.33 to $11.37, compared with the $11.32 analysts are anticipating.

[1] https://www.morningstar.com/news/dow-jones/202509039740/salesforce-shares-slip-as-investors-fret-over-light-ai-returns-2nd-update
[2] https://www.ainvest.com/news/assessing-salesforce-ai-ambitions-revenue-concerns-retail-sector-volatility-2509/
[3] https://www.ainvest.com/news/salesforce-sustained-revenue-outperformance-ai-driven-growth-momentum-2509/