Salesforce’s third-quarter revenue beats on strong cloud demand

7:17 pm Tuesday, December 03rd, 2024

By Zaheer Kachwala

(Reuters) -Salesforce beat Wall Street estimates for third-quarter revenue on Tuesday and raised the lower end of its annual revenue forecast, helped by robust spending on its enterprise cloud portfolio, sending its shares up 8% in extended trading.

Client spending on Salesforce’s software products and data cloud has remained healthy as companies seek to streamline and enhance their corporate workflows and process large quantities of data while integrating artificial intelligence.

The company’s revenue for the third quarter rose 8% to $9.44 billion, beating the average analyst estimate of $9.35 billion, according to data compiled by LSEG.

Salesforce has been betting big on its new Agentforce product to help reinvigorate growth rates, joining other tech companies such as Microsoft in developing AI agents that can autonomously complete tasks.

“The true turning point hinges on Agentforce execution and adoption,” Third Bridge analyst Charlie Miner said.

The Agentforce platform is underpinned by the company’s data cloud which continues to perform strongly and is the fastest growing organic product in its history, the company said in August.

Salesforce executives said on a post-earnings call on Tuesday that it would hire 1,400 people in its fourth quarter to help with the increased demand for Agentforce.

However, analysts expect Salesforce would require a strong boost in enterprise adoption of its services to break out of single-digit percentage growth and into mid-teens percentage growth.

“Salesforce’s 8% year-over-year growth is steady but falls short of the breakneck pace investors love in the tech world … the most realistic timeline for mid-teens percentage growth could be fiscal year 2027 or later,” Jeremy Goldman, senior director of briefings at Emarketer, said.

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.

On an adjusted basis, the company earned $2.41 per share in the third quarter, missing estimates of $2.44.

(Reporting by Zaheer Kachwala in Bengaluru; Editing by Shounak Dasgupta)