Some investment firms predict that Salesforce will beat expectations again when the customer relationship management software vendor announces earnings Wednesday for the first quarter of its 2024 fiscal year.
San Francisco-based Salesforce beat expectations last quarter amid a global tech business slowdown and the gathering of multiple activist investors. This time around, firms await updates from the vendor around its investment in artificial intelligence - especially generative AI - and more cross-selling across its product suite, which includes subsidiaries Tableau, MuleSoft and Slack.
Investment firm Wedbush predicts a "modest upside" to Wall Street's expectations, with strides in integrating Slack into the broader CRM suite and the majority of cost-cutting activities done, according to a May report.
"While the macro is not roses and rainbows and CRM is still battling through various headwinds, overall we saw stronger cross-sell activity this quarter and particular strength out of the Tableau front with a number of larger more transformational suite wide deals inked during the quarter," according to Wedbush.
Salesforce Q1 2024 preview
A letter in May from Birmingham, Ala.-based investment firm Vulcan Value Partners called Salesforce a "material contributor" to the fund's performance during the fund's first quarter.
"The company has taken numerous positive steps to increase profitability more quickly than expected," according to the letter.
"Salesforce also improved its corporate governance by recommending three new board members. The company is focused on improving margins, deemphasising acquisitions, and has expanded its stock buyback plan from $10bn to $20bn. We believe Salesforce can pursue these opportunities while continuing to increase its competitive position."
Meanwhile, a May report from Morgan Stanley laid out predictions of Salesforce getting closer to 30 per cent operating margins and an "upside to consensus topline estimates" due to "relatively stable checks, healthy partner pipeline commentary, and easier" year-over-year comparables.
Conversations with partners revealed "signs of stabilization in Salesforce's business relative to trends observed in F2H23, with healthy pipeline commentary and expectations for stable YoY growth trends despite ongoing macro challenges," according to Morgan Stanley.
Salesforce has more than 11,000 partners in its ecosystem, according to the vendor.
Here are other factors to consider going into Salesforce's earnings Wednesday.
AI Investment
Benioff and his team will no doubt have updates for listeners on the vendor's investment in AI and generative AI in Salesforce and the subsidiaries.
Salesforce revealed its EinsteinGPT offering in March and showed a variety of use cases.
It's possible Salesforce is already seeing benefits to its business from rolling out generative AI offerings, as Microsoft executives asserted during their quarterly earnings call in April.
"Some of the work we've done in AI even in the last couple of quarters, we are now seeing conversations we never had," Microsoft CEO Satya Nadella told analysts on the company's latest quarterly earnings call. "Whether it's coming through even just OpenAI's APIs, right - if you think about the consumer tech companies … They have gone to OpenAI and are using their API (application programming interface). These are not customers of Azure at all."
Morgan Stanley doesn't expect a Genie-like splash from EinsteinGPT, however.
According to the Morgan Stanley report from May, Salesforce partners have found "an even longer timeline to full tech readiness and less enthusiastic views on near-term customer adoption given Einstein's limited success to date."
A May report from investment firm Wedbush predicts AI monetisation in Salesforce's installed base could get the vendor at least $4bn more in revenue by 2025.
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