Analysis of Salesforce’s AI Acquisitions

I’m publishing this series to discuss a topic that I follow closely - cloud stocks, trends, strategy, acquisitions, and more. Please subscribe to my Cloud Stock Analysis series and never miss an article. I like fundamentals-focused business building, and teach the principles of fundamentals-focused business building at 1Mby1M.?Learn what to expect from 1Mby1M.

Salesforce (NYSE: CRM) recently announced its fourth quarter results that continued to surpass market expectations. However, the disappointing outlook sent the stock slipping 2% in the after-hours trading session.

Salesforce’s Financials

Salesforce’s revenues for the third quarter grew 11% to $9.29 billion, ahead of analyst estimates of $9.22 billion. Adjusted earnings of $2.29 per share were better than the market’s forecast of $2.26 per share.

By segment, Subscription and support revenues grew 12% to $8.75 billion. Professional services and other revenues fell 9% to $0.54 billion. Current remaining performance obligations grew 12% to $27.6 billion, better than the outlook of $27.09 billion.

Its annual revenue grew 11% to $34.86 billion. Subscription and support revenues for the full fiscal year grew 12% to $32.54 billion, and professional services and other revenues were flat at $2.32 billion.

For the first quarter, Salesforce forecast revenues of $9.12-$9.17 billion and an EPS of $2.37-$2.39. The market was looking for revenues of $9.15 billion with an EPS of $2.20.

Salesforce expects to end the current fiscal with revenues of $37.7-$38.0 billion and an EPS of $9.68-$9.76. Analysts were looking for revenues of $38.62 billion and an EPS of $9.57. Salesforce attributes the softer outlook for the year to foreign-exchange pressure, continued weakness in professional services, and a more conservative buying environment.

Salesforce’s AI Focus

Both the analysts and Salesforce do not expect significant uptick from AI initiatives on the revenues for the current year with the analysts estimating impact on revenues to be visible in 2026. Meanwhile, Salesforce continues to build its AI arsenal and recently announced the public beta availability of Einstein Copilot.

Einstein Copilot is an out-of-the-box conversational AI assistant built into the user experience to drive productivity by assisting users within their flow of work and enabling them to ask questions in natural language and receive relevant answers that are derived from secure proprietary company data from Data Cloud.

Earlier this month, Salesforce also announced the availability of Einstein 1 Studio, a set of low-code tools that enables Salesforce admins and developers to customize Einstein Copilot and embed AI across any app for every customer and employee experience. Recent reports have revealed that AI use in the workplace grew by 24% in the last quarter alone. About 80% of AI users believe that AI is improving their productivity. Salesforce plans on leveraging Copilot to address this trend.

Salesforce’s AI Acquisitions

Last year, Salesforce announced plans to acquire Airkit.ai, a creator of AI powered customer service applications and experiences, for an undisclosed sum. Redwood City-based Airkit.ai was founded in 2017 and is known for its AI solutions that help businesses to build flexible, omni-channel customer engagement applications, and AI-based customer service agents. Initially launched as a self-serve customer engagement platform, Airkit has recently pivoted to launched its first out-of-the-box GPT-4-based platform that allows companies to build specialized customer service chatbots. Airkit has been privately held and does not disclose its funding or financial details.

Salesforce also announced plans to acquire sales commission management tool Spiff for an undisclosed sum. Founded in 2017, Salt Lake City-based Spiff is a provider of a low-code interface designed to make it easy for businesses to administer a sales compensation plan. It comes with native integrations for the common enterprise CRM and ERP systems and can address complex commission plans and provide sales teams with a view into their commissions on a real-time basis. Prior to the acquisition, Spiff was privately held and had raised $110 million in funding from investors including Salesforce Ventures. Spiff does not disclose its financials. Spiff has been available on the Salesforce App Exchange for users to buy as well. Salesforce will integrate both Spiff and Airkit.ai into its Sales Performance Management software as it continues to build that platform into a one-stop-shop for all things sales for its customers.

Salesforce’s stock is trading at $304.41 with a market capitalization of $294.7 billion. It touched a 52-week high of $318.71 earlier this month. It was trading at a 52-week low of $170 a year ago.

Disclosure:?All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

Looking For Some Hands-On Advice?

For entrepreneurs who want to discuss their specific businesses with me, I’m very happy to assess your situation during my free online?1Mby1M Roundtables, held almost every week. You can also check out our free?Bootstrapping Course, our?Udemy courses,?YouTube channel,?podcast interviews?with VCs and Founders, and, to?follow my writings, click "Follow" from?here.

Photo Credit:?City of Indianapolis | Mayor’s Office?/Flickr.com