Salesforce forecast misses estimates, highlighting slow AI monetization

The Salesforce CRM issued a weaker-than-expected revenue forecast for the third quarter on Wednesday, raising concerns about the slow monetization of its artificial intelligence initiatives amid cautious customer spending driven by macroeconomic uncertainty - September 3, (Reuters).

The cloud software giant projected Q3 revenue between $10.24 billion and $10.29 billion, with the midpoint slightly below analysts' average estimate of $10.29 billion, according to LSEG data. Shares fell more than 5% in after-hours trading despite the company announcing a $20 billion expansion of its share buyback program.

Since the 2022 launch of OpenAI’s ChatGPT, Salesforce has rapidly integrated AI into its products, including its AI agent platform Agentforce, designed to automate workflows and improve efficiency. However, investors remain impatient for meaningful returns on these large-scale AI investments.

"Investors may feel a sense of frustration, especially as they contemplate the timeline for adequate returns on AI investments," said Melissa Otto, head of research at S&P Global’s Visible Alpha.

The company has also returned to an acquisition-driven strategy to enhance its cloud offerings, a move that could draw increased scrutiny from activist investors.

"As Salesforce brings more acquisitions into the fold, it will be able to offer even more intelligent agentic capabilities to customers," said Rebecca Wettemann, CEO of research firm Valoir.

CEO Marc Benioff recently disclosed that Salesforce has cut 4,000 customer support jobs due to AI automation, stating that the technology now powers 30% to 50% of the company’s operations.

For Q2, Salesforce reported $10.24 billion in revenue, beating expectations of $10.14 billion. Adjusted earnings per share for Q3 are expected to be between $2.84 and $2.86, in line with analysts' projections.