AI monetization is disappointing! Salesforce (CRM.US) Q4 earnings exceed expectations but revenue guidance falls short of expectations, buybacks increase by $10 billion.

On Thursday morning Beijing time, Salesforce (CRM.US) announced its performance for the fourth quarter of the 2024 fiscal year. The data shows that the company's Q4 revenue was $9.29 billion, an 11% year-over-year increase, exceeding market expectations of $9.22 billion; adjusted earnings per share excluding certain items were $2.29, also surpassing market expectations of $2.27. The adjusted operating profit margin was 31.4%, in line with market expectations. However, Salesforce's revenue guidance was lower than market expectations, indicating that its new artificial intelligence (AI) features have not yet stimulated growth. Salesforce expects revenue to be at most $38 billion in the 2025 fiscal year ending January 2025, a growth of about 9%. Analysts' average estimate is $38.6 billion. Over the past year, Salesforce has cut costs, improved profitability, and investors have turned their attention to the company's revenue growth. With many companies tightening their spending on software, Salesforce's revenue growth has slowed down. Like many tech companies, Salesforce is investing in developing new AI-based features to help boost sales of its customer relationship management software. Rishi Jaluria, capital markets analyst at Royal Bank of Canada, wrote in a report before the earnings announcement, "It is well known that investors are debating whether Salesforce's sustainable growth rate is in the double digits or single digits." After the earnings announcement, Salesforce fell about 4% in after-hours trading. The stock has risen 83% in the past 12 months as this software giant's profit margins have rapidly expanded, exciting Wall Street. Mike Spencer, Executive Vice President of Investor Relations at Salesforce, stated that the company provided subscription and support revenue guidance, expecting growth of more than 10% for the 2025 fiscal year, to show that the majority of its business is still growing at a double-digit pace. Spencer said, "This is even before artificial intelligence." Salesforce expects the adjusted operating profit margin for the 2025 fiscal year to reach 32.5%, exceeding Wall Street's expected 31.4%. Citigroup analyst Tyler Radke wrote before the earnings announcement that even with investment in artificial intelligence, this metric could potentially expand due to "ongoing cost constraints." Last month, Salesforce laid off about 700 people as part of its continued cost-cutting efforts. The company also announced that it will distribute a quarterly dividend of 40 cents per share to shareholders on April 11. Salesforce will also increase its stock buyback plan by $10 billion, bringing the total to $30 billion. The company is also adjusting its sales approach and pricing. This week, the company replaced some online product bundles with higher-priced options.