Salesforce Shares Drop 7% After Soft Q4 Guidance, CEO Defends Outlook

Salesforce reported quarterly earnings that beat analyst estimates with $2.91 EPS and $10.24 billion revenue, but its guidance for the third quarter fell short of expectations, leading to a 6-7% drop in its stock price. CEO Marc Benioff defended the cautious guidance, emphasizing the company’s strong results and the transformative potential of its AI offerings, including its Agentforce product, which customers reportedly find valuable beyond being a mere ChatGPT repackage. Despite beating earnings, Salesforce faces a competitive market and ongoing transitions in its software offerings, resulting in mixed analyst ratings ranging from Hold to Outperform, with price targets varying widely between $221 and $405. Investors remain cautious due to muted overall growth and challenges in unearned revenue and billings, though Salesforce’s AI expansion and stock repurchase program provide some optimism. The company has also gained traction with government clients, notably winning a cost-competitive deal with the U.S. Army against Palantir. Market watchers await further developments at the upcoming Dreamforce conference to better assess the commercial impact of Salesforce’s AI initiatives.