Salesforce shares surge 11% to hit record high after AI boom fuels Q3 earnings; stock up 26% YTD | Stock Market News

Salesforce Inc. shares hit a record high on Wednesday after the company reported better-than-expected quarterly revenue, boosting hopes for the company’s much-hyped artificial intelligence strategy.

Sales increased 8.3% to $9.44 billion in the period ended Oct. 31, the company said Tuesday in a statement. Analysts, on average, estimated $9.35 billion, according to data compiled by Bloomberg. Adjusted operating margin, a measure of profitability, was 33.1%, compared with an average estimate of 32.2%

Salesforce, 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. The San Francisco-based company launched its product, dubbed Agentforce, in October, with initial pricing of about $2 per agent conversation.

The shares rose as much as 11% to $367.20 after markets opened in New York on Wednesday.

Chief Executive Officer Marc Benioff said last month 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% on optimism for Salesforce’s new AI strategy. “Agentforce has overtaken the CRM narrative by storm,” wrote Tyler Radke, an analyst at Citigroup, ahead of the results.

“As I’m sure everybody knows on the quarter — these numbers are not what we’re really excited about,” 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.”

The higher-than-expected profit margin is the standout number in results, said Anurag Rana, an analyst at Bloomberg Intelligence, said in an interview on Bloomberg Television.

Salesforce said fiscal third-quarter profit, excluding some items, was $2.41 a share. Analysts, on average, estimated $2.44. The earnings were affected by losses within Salesforce Ventures, the company’s investment arm, Spencer said.

Revenue will be $9.9 billion to $10.1 billion in the current quarter ending in January, in line with analysts’ estimates. Current remaining performance obligation, a measure of booked sales, will expand about 9%, compared with a 9.2% 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 1% in constant currency, compared with a 13% jump in the preceding quarter.

The business unit containing marketing and e-commerce software expanded 8% in constant currency during the quarter, just ahead of Wall Street estimates. 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 on Wednesday that it spent $344 million to acquire Zoomin, a data-focused startup. Deal terms weren’t disclosed when the acquisition was first announced in September.