Salesforce shares surge 11% to hit record high after AI boom fuels Q3 earnings; stock up 26% YTD
- Salesforce hit a record high of $368.7, up 11 per cent in early morning trading and is set to add more than $35 billion to its market valuation of $316.85 billion if gains hold
Salesforce Inc. shares hit a record high on Wednesday, December 4, after the customer relationship management software maker reported better-than-expected quarterly revenue, boosting hopes for the much-hyped artificial intelligence (AI) strategy. Salesforce provided an upbeat forecast for its newly launched AI-integrated products.
Salesforce hit a record high of $368.7, up 11 per cent in early morning trading and is set to add more than $35 billion to its market valuation of $316.85 billion if gains hold. The stock has gained about 26 per cent this year through the last close, and the new median price target of $380 represents an about 15 per cent upside.
Salesforce Q3 earnings: Key Metrics
Sales increased 8.3 per cent to $9.44 billion in the period ended October 31. Analysts, on average, estimated $9.35 billion, according to data compiled by Bloomberg. Adjusted operating margin, a measure of profitability, was 33.1 per cent, compared with an average estimate of 32.2 per cent.
The San Francisco-based company launched its product, dubbed Agentforce, in October, with initial pricing of about $2 per agent conversation. Salesforce is banking on Agentforce to reenergize its growth as tech firms tap into rising demand for AI agents that can autonomously complete tasks.
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On a post-earnings call, Salesforce executives said even though Agentforce was made generally available in late October, it delivered 200 deals. They also projected a strong pipeline of deals. Salesforce now expects fiscal year 2025 revenue between $37.8 billion and $38 billion, compared with its prior forecast range of $37.7 billion to $38 billion. Third-quarter revenue rose eight per cent to $9.44 billion.
The top seller of customer relations management software, pivoted its AI strategy this year to focus on tools called agents, which are designed to complete tasks such as customer support or sales development without human supervision.
Chief Executive Officer Marc Benioff said that he was so confident in Agentforce that Salesforce would add 1,000 employees to sell it. That planned hiring surge follows almost two years of costs cuts at the company, including job reductions, as Benioff worked to control expenses and improve profitability after pressure from activist investors.
The company has signed a “good number” of deals related to Agentforce, Executive Vice President Mike Spencer said in an interview after the earnings release. Still, these deals are largely initial roll-outs and will take time to show up in the company’s results, he added.
The stock has been volatile this year, dipping to a low of $218.01 on May 30 after the company projected the slowest sales growth in its history. Since then, the shares have rebounded more than 50 per cent on optimism for Salesforce’s new AI strategy.
“As I’m sure everybody knows on the quarter — these numbers are not what we’re really excited about,” CEO Benioff said on a conference call after the results were released. “And while the quarter numbers are fantastic, the real excitement is really what is hitting with the technology.”
Salesforce said fiscal third-quarter profit, excluding some items, was $2.41 a share. Current remaining performance obligation, a measure of booked sales, will expand about nine per cent, compared with a 9.2 per cent increase expected by analysts.
Sales growth in Salesforce’s large acquired divisions — Slack, Mulesoft, and Tableau — dipped in the fiscal third quarter, the company said in a presentation. Mulesoft revenue expanded one per cent in constant currency, compared with a 13 per cent jump in the preceding quarter.
The business unit containing marketing and e-commerce software expanded eight per cent in constant currency during the quarter. The company’s Commerce Cloud product has seen increased competition from Canadian software vendor Shopify Inc., which says it has taken hundreds of Salesforce clients. Salesforce also said that it spent $344 million to acquire Zoomin, a data-focused startup.
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