Salesforce Guidance Misses Expectations, AI Disrupting Software Industry Concerns Rise

Although Salesforce's latest quarterly revenue exceeded expectations, the guidance for the next quarter and the full year was below market expectations. Coupled with the total remaining performance obligations falling short of analyst estimates, concerns about the impact of AI on traditional software business models intensified, causing the company's stock price to temporarily fall by more than 3% after market hours.

In the first quarter of fiscal year 2027, Salesforce achieved a total revenue of $11.133 billion, a year-over-year increase of 13%, slightly above the $10.5 billion analysts expected, with Informatica contributing approximately $444 million. The non-GAAP operating profit margin reached 34.8%, expanding by 2.5 percentage points from the same period last year, and GAAP net profit increased by 37% year-over-year to $2.107 billion.

However, the forward-looking guidance disappointed the market. The company expects second-quarter revenue to be between $11.27 billion and $11.35 billion, with the midpoint lower than the $11.4 billion analysts expected; the full-year revenue guidance midpoint is approximately $46.05 billion, a year-over-year increase of about 11%, also failing to meet market expectations. The total remaining performance obligations were $67.9 billion, below the average analyst expectation of $68.9 billion.

Agentforce Becomes the Biggest Highlight

AI intelligent body business was the most watched growth engine this quarter. Agentforce's annualized recurring revenue has broken through $1.2 billion, a year-over-year increase of 205%; combined with Data 360-related businesses, the AI and data combined annualized revenue is about $3.4 billion, with a year-over-year increase of over 200%.

From a usage perspective, Agentforce and the Slack platform have delivered a cumulative total of 3.8 billion intelligent body work units, a sequential increase of 111%. The company has processed over 28.6 trillion tokens to date, a sequential increase of 152%. More than half of the Agentforce and Data 360 bookings come from existing customers, demonstrating strong customer re-purchase capabilities.

CEO Benioff stated that intelligent body AI is the biggest growth opportunity for the company and its customers. The public sector Industry Cloud's annualized revenue has broken through $2 billion, a 23% year-over-year increase, and the public sector intelligent body work unit volume has grown nearly 400% sequentially.

Accelerated Repurchases of $25 Billion Increase Debt

The company returned $27.5 billion to shareholders in the quarter, with the core being an accelerated share repurchase agreement of $25 billion. According to the agreement, the company has received approximately 103 million shares in advance, with final settlement expected to be completed in the third quarter.

To support the repurchase, Salesforce raised approximately $24.8 billion through bond financing. As of April 30, the company's non-current debt has risen significantly from about $10.4 billion at the end of last year to $39.3 billion. As a result, the company has revised its full-year operating cash flow and free cash flow growth guidance to 4% to 5%.

The basic number of shares in circulation has been reduced to about 868 million, and the company remains committed to maintaining the full-year non-GAAP operating profit margin target of 34.3% and reiterates its confidence in accelerating organic revenue growth in the second half of the fiscal year. Salesforce's stock price has fallen by about 33% so far this year.