Salesforce Inc. delivered stronger-than-expected financial results today, but the software vendor came up short when it issued its current quarter and full-year revenue forecast, as the stock barely moved in the after-hours trading session.

The company reported adjusted first-quarter earnings per share of $3.88, crushing Wall Street’s forecast of just $3.12 per share. Revenue for the period rose 13% from a year earlier, to $11.13 billion, surpassing the consensus estimate of $11.05 billion. Profitability increased too, with net income for the quarter coming to $2.11 billion, up from $1.54 billion in the year-ago quarter.

As for guidance, the company forecast earnings of $3.25 to $3.27 per share in the second quarter, with revenue pegged at $11.27 billion to $11.35 billion. Wall Street is looking for earnings of $3.25 per share on sales of $11.36 billion.

For the full year, Salesforce said it’s anticipating earnings of between $14.06 and $14.12 per share on sales of $45.9 billion to $46.2 billion. The middle of its revenue forecast range, at $46.05 billion, implies growth of around 11%. Wall Street is modeling full-year earnings of $13.22 per share on higher revenue of $46.12 billion.

Chief Operating Officer and Chief Financial Officer Robin Washington said the guidance reflects ongoing challenges the company is facing in marketing and commerce and the sluggish performance of Tableau in terms of bookings and renewals. It also takes into account the increased license revenue volatility that stems from its recent $9.6 billion acquisition of Informatica LLC, the data management company.

Surviving the SaaSpocalypse

The guidance did little to reassure the numerous investors who are worried that the rise of artificial intelligence is going to eat Salesforce’s lunch and hurt its future growth prospects. Those fears have sent software stocks, in particular software-as-a-service stocks, into a tailspin this year, and Salesforce is down 33% so far. In contrast, the S&P 500 index has risen 10% in the year to date.

On a conference call with analysts, Chief Executive Marc Benioff (pictured) once again dismissed fears of the “SaaSpocalypse,” pointing to the company’s stellar results in the latest quarter. “You can see we just had a record quarter,” he told analysts in response to a question. “We’ve never seen this many large transactions happen.”

Salesforce has tried to ride out the selloff of its stock by accelerating its share repurchases. Benioff said the company has already repurchased $27.1 billion worth of stock this year, and Washington added that the buybacks have reduced its diluted share count by 10% from a year earlier, while boosting the company’s adjusted earnings per share by 23 cents. “We can look around for great opportunities in the market, but Salesforce is probably the greatest,” Benioff insisted. “We are very happy to buy back our stock.”

Rather than disrupt Salesforce, AI is likely to strengthen the company, Benioff added. He pointed to Slack’s recent integration with Anthropic PBC’s Claude AI model as evidence of this. “That Slack bot is driven by Anthropic,” he explained. “By building Anthropic now into Slack, we’re able to take an incredibly successful product and give tremendous advice.”

AI momentum accelerates

Salesforce’s response to the AI threat has been to double down on its own AI offerings, most notably with the Agentforce platform, which enables customers to create autonomous agents that can perform various sales and customer service tasks on behalf of human workers.

According to Benioff, the company generated $6.91 billion in subscription and support revenue from Agentforce apps, including those spanning sales, service, marketing, commerce and Slack. That’s up 9% from a year earlier. Revenue from Data 360, a headless platform, plus other subscription and support services, rose 25%, to $3.68 billion. Informatica contributed $428 million in sales. Moreover, Agentforce’s annualized revenue run rate hit $1.2 billion, up an impressive 205% from a year ago.

On the other hand, Washington admitted that Salesforce’s commerce business and Tableau business analytics software platform both showed weakness during the quarter. The company’s remaining performance obligations, which measure contracted revenue that has not yet been realized, also came up light at $67.9 billion, below the Street’s $68.61 billion forecast.

During the quarter, Salesforce debuted new AI agents specifically for telecommunications customers, announced a new “headless” version of Agentforce that’s designed to help humans and agents develop from any location in a conversational way, and partnered with Google LLC on agentic cross-platform collaboration.

However, it was the Slack integration with Anthropic and the numerous Slackbot updates that most excited Benioff. He told analysts that Salesforce has totally transformed Slack since acquiring it back in December 2020. “It was doing less than a billion in ARR and it was struggling,” he explained. “It was having problems. The management team was really not clear how they were competing against Microsoft.”

Slack has since evolved to become a vital element of the Salesforce ecosystem. During the quarter, Slack was a key component of almost half of all new deals signed by the company that were valued at over $1 million. “I’m sure we’ll be talking in short order about Slack being a $10 billion cloud,” he promised.

Benioff also pointed to the company’s growing headcount as further evidence of its growing strength. He explained that it has accelerated hiring in a number of areas, with the most important being its sales teams. That’s because, while AI agents can automate many tasks, they still struggle when it comes to actually selling things.

“Agents are not exactly doing that,” Benioff told analysts. “They can qualify, they can provide service, but in sales we still scale, because there’s so many different parts of the market that we have to get to, so that will be a critical part of expanding our company, but at the same time expanding our margins.”

Photo: Fortune Photo/Flickr