Salesforce Inc. racked up a solid earnings and revenue beat as it delivered its second-quarter financial results today, showing that it’s making progress in its transition to an agentic artificial intelligence platform.

However, the company’s guidance for the current quarter came up short, and investors bailed in extended trading.

The company reported earnings before certain costs such as stock compensation of $2.91 per share, easily surpassing the analyst forecast of $2.78. Revenue for the period rose 10% from a year earlier, to $10.24 billion, ahead of Wall Street’s forecast of $10.14 billion. Profitability also rose, with net income reaching $1.89 billion, up from $1.43 billion in the year-ago quarter.

Salesforce also reported current remaining performance obligations, which represents the amount in revenue it expects to receive over the next year from services not yet delivered, of $29.4 billion, up 11% year-over-year and above the consensus forecast of $29.2 billion.

Salesforce Chair and Chief Executive Marc Benioff (pictured) said the company delivered an “outstanding quarter,” showing a strong performance in terms of revenue growth, margin and cash flow. “These results reflect the success of our customers like Pfizer, Marriott and the U.S. Army, who are transforming into agentic enterprises, where humans and AI agents work side by side to reimagine workflows, accelerate productivity and deliver customer success,” he insisted.

However, the company’s solid performance was undone in the eyes of investors when it issued its guidance for the current quarter. Salesforce officials projected revenue of between $10.24 billion and $10.29 billion, with the midpoint of that range below the Street’s target of $10.29 billion.

For the full-year, Salesforce did at least raise the lower end of its guidance range, saying it now expects total revenue of $41.1 billion and $41.3 billion, up from an earlier range of $41 billion to $41.3 billion. But it’s still below the Street’s forecast of $41.4 billion, and that may well be what prompted the company’s stock to decline over 5% in after-hours trading.

Salesforce has lost some of its luster on Wall Street this year as a result of its somewhat pedestrian revenue growth, which until this quarter had been stuck in the single digits since the beginning of fiscal 2024. Although the company regularly talks of its achievements in AI and especially its Agentforce platform, which allows businesses to create and manage AI agents that use large language models to automate business tasks from a simple prompt, it hasn’t managed to succeed in the same way as many of its peers in that industry. In the year to date, Salesforce’s stock has declined 22%.

Although Agentforce is seeing strong adoption among enterprises, the problem investors have is that the company has struggled to make money from the platform as quickly as hoped, Valoir analyst Rebecca Wettemann told SiliconANGLE. “Salesforce is having to show customers the money before they’re willing to spend on Agentforce,” she said. “This is reasonable given the disillusionment that many companies have experienced with early DIY AI science projects, many of which were real money pits.”

However, Wettemann sees encouraging signs for Salesforce in the growth of its Data Cloud business. She pointed out that the company’s combined annual recurring revenue from Data Cloud and AI came to $1.2 billion in the quarter, up more than 120% from the previous year. “This is an important number to focus on because data is the foundation for AI,” Wettemann said. “$1.2 billion is not an insignificant number, nor is the growth figure, given the size and growth rate of AI revenues at Salesforce’s main competitors.”

The analyst said she’s also optimistic about the launch of Agentforce for government, which could provide faster time to value for public sector customers, which is a key market for Salesforce, though it faces tough competition there from the likes of Oracle Corp. and ServiceNow Inc.

Salesforce recently made a bold step to increase the relevance of its Data Cloud platform, announcing its intent to acquire the data management software giant Informatica LLC for $8 billion, which could further strengthen its AI foundation. The company also announced that it’s raising the prices of some of its products in an effort to boost its revenues.

But for all of Salesforce’s efforts in AI, some analysts are unconvinced, and believe that many agentic AI startups could ultimately upend the company’s business in the same way that Salesforce upended legacy software providers with its cloud-based model in the early 2000s.

Investor sentiment in the software industry has generally been low this year as a result of these fears, Matt Stucky, chief portfolio officer of Northwestern Mutual, said in an interview with MarketWatch. “It will take a noticeable amount of top-line revenue acceleration for Salesforce to refute the bear argument about the competitive threat of AI,” Stucky said.

Photo: SiliconANGLE