CRM "Mixed" Earnings Expectations: AI's Double-Edged Sword in Stock Growth

**SPEAKER_1** (0:00)
Steve Koenig is with us, US Head of Software and Services Research at Macquarie. I'm so glad you're with us. As I looked through your report and reports overall, and by the way, you have a 190 target and a neutral rating from what I understand. That's lower than where we are now. But there are some concerns that maybe the business activity, the pipeline momentum, there's some mixed trends that are happening. Would you agree with that?

**Steve Koenig** (0:27)
Hi, Nicole. Absolutely. I think that's right. On the one hand, you've got some good growth with Data 360 and with Agentforce going on. But on the other hand, there's been a lot of weakness with Tableau. I think a lot of that's due to AI, can spin up new analytic dashboards very easily.
There's been weakness in marketing and commerce. So some mixed currents here. The company has been messaging that we should see organic growth in the second half after this quarter.
Qualitatively, investors will want to hear that net new annual order value is growing faster than annual order value. And that could presage some acceleration in revenue in the back half.

**SPEAKER_1** (1:19)
And while the targets, I guess, are somewhat mixed, you talked about Agentforce cycle.
That's evolving from the testing initiatives that returns. And so the other thing I think about is the robust usage trends. Are they good enough to beat expectations, either with the earnings next week or going forward?

**Steve Koenig** (1:43)
Yeah. Well, you know, I think Agentforce is growing well, but it's not big enough to appreciably move the needle yet for Salesforce.
You know, I think that the acceleration that they're looking for, part of it would be driven by sales hiring, but part of it would just be, you know, some of these drags on the business, some of these businesses that aren't doing well, get smaller in the mix. So this quarter is not the quarter where we're going to see substantial revenue acceleration. You know, that would likely be in the back half, but some of those numbers, by the time you get to Q4 and the acquisition of Informatica has annualized, some of the expectations out there look pretty high, and I think there's a good chance that Salesforce will not raise the high end of their guidance in this report, their full year guidance, and that could be disappointing. We'll have to see what they do.

**SPEAKER_1** (2:46)
Was it imperative what the management did do, raising the low end of the fiscal year 27 revenue guidance just by raising, you said they're not going to raise to the top end, but by lifting the bottom up, was that really meaningful to you?

**Steve Koenig** (3:01)
No, not so much. You know, I think people tend to expect Salesforce to perform closer to the top end than the low end. You know, the low end is kind of a easy bogey to clear.
So this quarter, if we see some, a little bit of acceleration in current RPO is a metric that we track, and maybe a half point acceleration in overall revenue, that might be good enough for investors. But as you mentioned, the stock's been behaving very well in the last two months, and that just creates a little bit of a tougher setup than we might have had otherwise.

**SPEAKER_1** (3:46)
And let's bring in to the conversation, Dave Nicholson, Chief Research Officer at Futurum. I'm so glad you're with us, because I wanted to ask you your thoughts and expectations for Salesforce ahead of the earnings next week. What are you gonna be watching for specifically?

**Dave Nicholson** (4:02)
And I missed a couple of the earlier comments, so I don't want to be too redundant. But clearly, looking at whether or not they can continue growth from just a standard revenue recognition perspective. But the main thing is this conversion from per seat licensing to the token economy. And so far, what we hear is good things, but they're able to convert and avoid the trauma from the so-called SaaSpocalypse. So a lot of this is as many specifics as we can get on Agentforce.
I'd like to hear about the adoption of Slackbot within their customers that are using Slack also.

**SPEAKER_1** (4:44)
Yeah, Slack has been a bright spot, right? Agentforce, Data360 and Slack, as you wrote in your Macquarie note, Slack were offset by the weakness that we saw in marketing commerce and Tableau. Steve, this is what you have in your note.
Off the cuff, I remember some of these were just not that long ago, acquisition Slack and Tableau, right? They've had to bring them in. I guess there are wins and losses here. Steve, when it comes to you, expect more growth through acquisition with this company? Because that's been part of the game for them.