To The Moon

AI-enabled software industry is facing a "bottleneck", which is $Ceraflex (CRM)$ The market's skepticism following the just-released Q1 results for fiscal year 25 has seen CRM shares post their worst one-day (after-hours) performance since the financial crisis, dropping 16% as revenues and profits fell short of expectations for the first time since the financial crisis of 2008 and as it lowered its guidance for the next quarter. 16%.

Overview of performance

• Revenue of $9.13 billion, up 11% year-over-year, was below market expectations of $9.15 there, including $8.59 billion in revenue from subscription and support services, a key business that includes AI data plus, which was below market expectations of 12% year-over-year growth.

• Existing remaining performance obligations of $26.2 billion increased by 10 per cent year-on-year and by 10 per cent at constant exchange rates.

• Operating cash flow of $6.25 billion, up 39%, and free cash flow of $6.08 billion, up 43%.

• Returned $2.2 billion and $400 million to shareholders through share repurchases and dividends, respectively.

• In terms of guidance, Q2 revenue guidance was $9.2 billion to $9.25 billion, up 7%-8% year-over-year, below market expectations of $9.37 billion, and while full-year revenue guidance was maintained at $37.7 billion to $38 billion, up 8%-9% year-over-year, guidance for subscription and support services revenue growth was lowered to a little under 10%, compared to the market's expectation of 10% growth

  

Investment Highlights

The Salesforce call emphasized its transition to AI, and in general, Salesforce maintained strong growth and cash flow despite lowering some of its guidance.

The company mentioned the following plans for future growth

1. Continuing its push to transition to AI, the company emphasized its leadership in AI and plans to leverage the 250 petabytes of customer data and metadata it manages to deliver accurate, relevant AI outputs to the enterprise.

2. Accelerating Data Cloud.Data Cloud is seen as Salesforce's next billion-dollar cloud service, accounting for 25 percent of the quarter's big deals. It provides organizations with a unified data source that securely delivers AI insights and actions across Customer 360.

3. Launching new AI products and services. While not revealing specific details, Salesforce said it will be launching new AI-powered products and services to meet customer demand for AI.

But I Salesforce's selloff also represents what some investors are thinking about software companies in the AI industry

1. CRM had said in Q4 last year that it had not included a huge impact in its guidance despite the high demand for AI products, and wondered if it was a dilemma for the company to expand its business in this area;

2. Is the specific industry demand not as high as the market expects, or is it just the company?

3. Is there a geopolitical consideration due to the bias in favor of Israel as well as Judaism and the company's direct help?

4. Has the activist investor managed for two years to focus more on internal efficiencies, with margins and cash flow not being the main goals, and has he lost sight of the open source goals at the business level?

If it is an industry-wide impact, then I am afraid that the next to receive the impact of $Oracle(ORCL)$ is also difficult to escape the negative impact, and even, if the AI PC does not meet the expected results, $Microsoft(MSFT)$ may also meet the highpoint.