(Bloomberg) — Salesforce Inc. reported quarterly revenue that topped analyst estimates, boosting investor hopes that the company’s much-hyped strategy for artificial intelligence products will improve financial results. Shares gained about 10% in extended trading.
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Revenue rose 8.3% to $9.44 billion in the period ended Oct. 31, the company said in a statement Tuesday. Analysts estimate an average of $9.35 billion, according to data compiled by Bloomberg. Adjusted operating margin, a measure of profitability, was 33.1%, compared to an average estimate of 32.2%
Salesforce, the top seller of customer relationship management software, shifted its AI strategy this year to focus on tools called agents, which are designed to perform tasks such as customer support or sales development without human supervision. The San Francisco-based company launched its product, called Agentforce, in October, with an initial price of about $2 per agent call.
Chief Executive Officer Marc Benioff said last month that he had so much confidence in Agentforce that Salesforce would add 1,000 employees to sell it. That planned headcount increase follows nearly two years of cost cuts at the company, including job cuts, as Benioff worked to control expenses and improve profitability after pressure from activist investors.
The company has signed a “large number” of deals related to Agentforce, Executive Vice President Mike Spencer said in an interview after the earnings release. Still, these deals are largely an initial implementation and will take some time to be reflected in the company’s results, he added.
The stock has been volatile this year, falling to a low of $218.01 on May 30 after the company forecast the slowest sales growth in its history. Since then, shares have risen more than 50% on optimism about Salesforce’s new AI strategy. “Agentforce has taken the CRM story by storm,” Citigroup analyst Tyler Radke wrote ahead of the results.
“As I’m sure everyone knows this quarter, these numbers are not what we’re really excited about,” Benioff said on a conference call after the results were announced. “And while the quarterly numbers are fantastic, the real excitement is in what’s happening with the technology.”
Shares hit a high of $367 in extended trading after closing at $331.43 in New York. The higher-than-expected profit margin is the standout figure in the results, Anurag Rana, an analyst at Bloomberg Intelligence, said in an interview on Bloomberg Television.
