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Salesforce Stock Drops 5% After Earnings Miss, But Benioff Remains Optimistic: ‘We’ll Have a Great Year’

HomeSalesforce Stock Drops 5% After Earnings Miss, But Benioff Remains Optimistic: ‘We’ll Have a Great Year’

Salesforce Stock Drops 5% After Earnings Miss, But Benioff Remains Optimistic: ‘We’ll Have a Great Year’

Salesforce Stock Drops 5% After Earnings Miss, But Benioff Remains Optimistic: ‘We’ll Have a Great Year’

Salesforce Stock Takes a Hit After Missed Earnings Outlook, but CEO Marc Benioff Remains Optimistic

The stock price of Salesforce, a leading customer relationship management (CRM) software company, took a significant hit in after-hours trading on Wednesday after the company's earnings per share (EPS) outlook for 2025 fell below consensus. The stock had risen by 16% over the past six months due to optimism surrounding the financial impact of Salesforce's new Agentforce technology.

Salesforce Stock Falls 5% in After-Hours Trading

The decline in Salesforce stock price was triggered when executives revealed on the earnings call that Agentforce would only contribute modestly to revenue in 2025. A more meaningful contribution is forecast for 2026. Additionally, a stronger US dollar is expected to weigh on sales by $200 million this year.

Agentforce Technology: A Key Growth Driver

Salesforce co-founder, chairman, and CEO Marc Benioff expressed confidence that the company could deliver upside on its operating margin guidance for this year. He noted that the guidance for Agentforce is prudent given the company's recurring revenue model and it being in the product's early days.

"We'll have a great year," Benioff said, emphasizing the importance of Agentforce in driving growth and innovation at Salesforce.

Agentforce Deals Surpass 5,000 Since October

Salesforce announced that it has closed over 5,000 Agentforce deals since October, with more than 3,000 of these being paid agreements. The company also reported that annual recurring revenue from data cloud and artificial intelligence more than doubled year-over-year.

Evercore ISI Analyst Weighs In on Salesforce's Earnings

Evercore ISI analyst Kirk Materne commented on the earnings report in a client note: "Not a huge surprise to see a 'prudent' guide given the imminent CFO transition and between F/X, leap year, and professional services weakness — bears can take a victory lap on the first quarter revenue guide."

However, Materne noted that Salesforce's story remains intact, with accelerating growth over the year, increasing adoption of Agentforce, and further upside to the operating margin guide.

Earnings Overview: Beats Where It Matters

Salesforce's earnings report showed strong performance in several key areas:

  • Net sales: $10 billion (+8% year-over-year) vs. $10.04 billion estimate (guidance: $9.9 billion to $10.1 billion)
  • Current remaining performance obligations: $30.2 billion (+9% year-over-year) vs. $30.12 billion estimate
  • Adjusted operating margin: 33% (vs. 31.2% a year ago) vs. 32.8% estimate
  • Diluted earnings per share: $2.78 (+21.4% year-over-year) vs. $2.61 estimate (guidance: $2.57 to $2.62)

Guidance Misses Across the Board

However, Salesforce's full-year sales guidance fell short of consensus estimates at $40.5 billion to $40.9 billion vs. $41.46 billion estimate. The company also provided a full-year operating margin guidance of 34% and EPS guidance of $11.09 to $11.17 vs. $11.20 estimate.

AI and E-commerce Darlings Sell-Off, But...

Earnings from software vendors pivoting toward the AI era come at an interesting time. On one hand, AI darlings inside the "Magnificent Seven" — Meta (META), Amazon (AMZN), Google (GOOG), Apple (AAPL), Nvidia (NVDA), Microsoft (MSFT), and Tesla (TSLA) — have seen a mixed bag of trading this year.

Mixed Bag for Tech Giants

Only one large-cap tech component, Meta, has meaningfully outperformed the S&P 500 (^GSPC) this year. Even after a 4% sell-off over the past five sessions, shares are still up 16% year-to-date. AI darling Nvidia was down 6% year-to-date amid a sell-off going into earnings.

Software Earnings Shine

On the other hand, software earnings have panned out well, and stocks have been rewarded. Snowflake (SNOW) shares popped 12% after the close today amid a better-than-expected outlook. ZoomInfo (ZI) shares exploded more than 23% today following a better-than-expected quarter.

Conclusion

Salesforce's stock price took a hit in after-hours trading due to missed earnings guidance, but CEO Marc Benioff remains optimistic about the company's prospects. The introduction of Agentforce technology is expected to drive growth and innovation at Salesforce, with a more meaningful contribution forecast for 2026. Despite some areas where the company fell short, Salesforce's story remains intact, with accelerating growth over the year, increasing adoption of Agentforce, and further upside to the operating margin guide.

Market Analysis

The AI era has brought about significant changes in the software industry, with earnings from vendors pivoting toward AI coming at an interesting time. While some tech giants have seen a mixed bag of trading this year, others like Snowflake and ZoomInfo have been rewarded for their strong performance.

Market Outlook

As Salesforce looks to deliver on its operating margin guidance for this year, investors will be closely watching the company's progress. With Agentforce set to contribute modestly to revenue in 2025, a more meaningful contribution is forecast for 2026. The stronger US dollar is expected to weigh on sales by $200 million this year.

Investor Takeaway

Individual investors can benefit from understanding the trends and shifts happening in the software industry, particularly with regards to AI and e-commerce. By staying informed and making data-driven decisions, investors can navigate the complex market landscape and make informed choices about their investments.

Final Thoughts

Salesforce's earnings report was a mixed bag, with some areas falling short of expectations while others exceeded them. However, CEO Marc Benioff remains optimistic about the company's prospects, highlighting the importance of Agentforce in driving growth and innovation at Salesforce.

With accelerating growth over the year, increasing adoption of Agentforce, and further upside to the operating margin guide, Salesforce's story remains intact. As investors look to navigate the complex market landscape, understanding the trends and shifts happening in the software industry will be crucial for making informed decisions about their investments.

Recommendations

Investors should continue to monitor Salesforce's progress as it works to deliver on its operating margin guidance for this year. With a more meaningful contribution from Agentforce forecasted for 2026, investors may want to consider adding Salesforce to their portfolios.

Additionally, individual investors can benefit from understanding the trends and shifts happening in the software industry, particularly with regards to AI and e-commerce. By staying informed and making data-driven decisions, investors can navigate the complex market landscape and make informed choices about their investments.