Shares of Salesforce climbed 12% in after-hours trading on Wednesday, following the cloud software provider's release of quarterly results and guidance that surpassed Wall Street projections. The company reported adjusted earnings of $5.90 per share, while revenue hit $11.35 billion, edging past the $11.32 billion analysts had anticipated.
For the fiscal second quarter ending July 31, revenue grew 11% year-over-year. Net income reached $3.53 billion, or $4.29 per share, representing a substantial 87% jump from the $1.89 billion, or $1.96 per share, recorded in the same period last year. The company attributed a $2.6 billion gain to its strategic investment in AI startup Anthropic, which announced in May that its equity financing round valued the firm at $965 billion.
Free cash flow surged 81% to $1.1 billion, far exceeding the $643.2 million consensus estimate from StreetAccount. Alphabet and Microsoft have also recently booked gains from their investments in Anthropic.
Looking ahead to the fiscal third quarter, Salesforce projects adjusted earnings per share between $3.42 and $3.44, with revenue ranging from $11.42 billion to $11.50 billion. Analysts surveyed by LSEG had forecast adjusted EPS of $3.38 and revenue of $11.41 billion. For the full fiscal year, the company now expects revenue in the range of $46.1 billion to $46.4 billion, with the midpoint implying 11% growth, compared to its May guidance of $45.9 billion to $46.2 billion. The current forecast aligns closely with the $46.11 billion consensus estimate.
On the same day, Salesforce unveiled Claudeforce, a plugin for Anthropic's Claude model designed to assist sales representatives by drafting emails, providing relevant information, and updating records through chat interactions. During the quarter, the company also secured a $1.6 billion contract with the U.S. Department of Veterans Affairs and announced plans to acquire customer service startup Fin for $3.6 billion, with the transaction now expected to close in the fiscal third quarter—earlier than originally scheduled.
The annualized revenue run rate for the Agentforce AI product surpassed $1.5 billion, marking a 240% year-over-year increase, accelerating from the 200% growth reported in the previous quarter. However, Chief Operating and Financial Officer Robin Washington acknowledged during Wednesday's earnings call that the company is encountering "headwinds and volatility" in sales of integrated and analytics software licenses.
Salesforce reported current remaining performance obligations of $33.5 billion, a metric that gauges revenue expected to be recognized over the coming year, exceeding the $33.22 billion StreetAccount analysts had projected.
As of Wednesday's market close, Salesforce shares had declined 22% year-to-date, while the S&P 500 had gained 12% over the same period. Investors have been debating the extent to which generative AI models pose a threat to established software companies. "This is not the SaaSpocalypse," said Salesforce co-founder and CEO Marc Benioff. "We've been hearing these terrifying predictions about the end of software and models consuming everything for the past two quarters, but none of them have materialized for us."
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