(Bloomberg) — Salesforce Inc. issued fiscal year profit guidance that beat analysts’ estimates, seeking to appease investors concerned about slowing revenue growth at the software giant.

Most read by Bloomberg

Earnings will be between $10.03 and $10.11 per share for the fiscal year ending in January, compared with an earlier forecast of up to $9.94. Analysts on average had expected $9.91. The company reiterated its fiscal year revenue forecast of $37.7 billion to $38 billion.

Salesforce, the leading maker of customer management software, has turned its attention to growing profits in 2023 after battling with several activist investors. Recently, Wall Street has been concerned about slowing growth and is waiting to see when new initiatives such as artificial intelligence features will boost revenue.

“We continue to deliver disciplined, profitable growth and operating margins reached record highs this quarter,” Chief Financial Officer Amy Weaver said in the statement.

Salesforce slightly raised its annual adjusted operating margin forecast to 32.8%, compared to a previous forecast of 32.5%.

Shares rose about 3.5 percent in extended trading after closing at $258.90 in New York. The stock has fallen 1.6 percent this year.

Many large software makers are struggling to generate new revenue from AI products. At Salesforce, new higher-priced product variants with AI are starting to boost sales, but that contribution is still “fairly early,” investor relations chief Mike Spencer said in an interview.

Data Cloud, a product for organizing information from the company’s business applications and other sources for analytics, has been touted by management as a way to meet demand for AI capabilities. Still, analysts are increasingly skeptical that the service is gaining traction with customers. Spencer said Data Cloud had “good momentum” in the quarter.

During a conference call after the earnings announcement, CEO Marc Benioff introduced new branding for the company’s AI tools, calling the digital assistants powered by the new technology “agents.” Benioff, other executives and analysts used the word “agent” more than 100 times during the call.

For example, AI agents could help handle customer service requests in call centers, said Chief Operating Officer Brian Millham. A new product to manage agents will be available in October.

The story continues

Benioff said Salesforce’s new generative AI agents are more powerful than those offered by competitors or customers’ in-house solutions. “So many customers are so disappointed with what they bought from Microsoft with Copilots – they’re not getting the accuracy of the answers they want,” he said, referring to Microsoft Corp.’s branded AI tools.

In the second quarter of the fiscal year, sales rose by 8 percent to $9.33 billion, the company said in a statement on Wednesday. It was the first single-digit sales growth that Salesforce recorded in its 20-year history as a publicly traded company. Analysts on average had expected $9.23 billion.

Earnings, excluding certain items, were $2.56 per share, compared with an average estimate of $2.35.

The results showed signs of stabilization and slight improvement, which is a good sign in a difficult software buying environment, said Anurag Rana, an analyst at Bloomberg Intelligence. “There is more pressure on traditional software companies right now because customers are putting a much larger share of their funds into buying GPUs,” he said, referring to graphics processing units, the chips that power AI.

Salesforce also announced that Weaver is stepping down as CFO after four years. Weaver, who joined Salesforce in 2013, will stay in the role through the end of the fiscal year and then help with the transition after her successor is named, the company said.

(Updated with comments from executives starting in the ninth paragraph.)

Most read by Bloomberg Businessweek

©2024 Bloomberg L.P.