Salesforce (CRM) Q2 2025 Earnings Call Transcript

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Salesforce (CRM -2.01%)
Q2 2025 Earnings Call
Aug 28, 2024, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to Salesforce’s fiscal 2025 second quarter results conference call. [Operator instructions] I would now like to hand the conference over to your speaker, Mike Spencer, executive vice president of finance and strategy and investor relations. Sir, you may begin.

Michael Spencer — Executive Vice President, Investor Relations

Good afternoon, and thanks for joining us today on the fiscal 2025 second quarter results conference call. Our press release, SEC filings, and a replay of today’s call can be found on our website. Joining me on the call today is Marc Benioff, chair and CEO; Amy Weaver, president and chief financial officer; and Brian Millham, president and chief operating officer. As a reminder, our commentary today will include non-GAAP measures.

Reconciliations between our GAAP and non-GAAP results and guidance can be found in our earnings materials and press release. Some of our comments today may contain forward-looking statements that are subject to risks, uncertainties and assumptions, which could change. Should any of these risks materialize or should our assumptions prove to be incorrect, actual company results could materially differ from these forward-looking statements. A description of these risks, uncertainties, and assumptions and other factors that could affect our financial results is included in our SEC filings, including the most recent report on Forms 10-K, 10-Q, and any other SEC filings.

Except as required by law, we do not undertake any responsibility to update these forward-looking statements. And with that, let me hand the call over to Marc.

Marc Russell Benioff — Co-Founder, Chairman, and Chief Executive Officer

All right. Thanks so much, Mike, and thanks, everyone, for being on the call. We’ve got so many exciting things to talk about today, and we’re so excited to be with you, and we’re also getting really jacked for Dreamforce, so looking forward to that. And we are just going to have a great call here.

So, look, a year ago on this call, we talked about two amazing transformations. So, we’re transforming Salesforce for as we’re talking about the short and the long term, which was really code words for really addressing our financials, but really looking at this incredible AI opportunity. And now we look at a year later, I just couldn’t be more excited about how these two transformations are driving the success of the company. And really, I don’t think I’ve been more excited about the history of Salesforce and now the future of Salesforce and how well-positioned we are for the future.

And you can see it in our numbers with strong performance across revenue, cash flow, margin on CRPO. The numbers are beyond my expectation in the quarter. You can see that it’s been pretty awesome. And you can also see them, the incredible innovation of our product and engineering teams are delivering the success of our customers.

And we’re going to talk about a whole different kind of sales force today, a different kind of architecture and a product that we didn’t even talk about on the last earnings call that is going to be fundamental to our future and a manifestation of our decade of AI leadership, which is Agentforce. Now, in just a few weeks, we’re going to kick off Dreamforce, and I hope all of you are planning to be there, the largest AI event in the world with more than 45,000 trailblazers in San Francisco. And this year, Dreamforce is really becoming Agentforce. And I’ll tell you it’s a funny thing about Agentforce even one of our very top executives in engineering sent me a text last week and said, “Hey, should we be renaming the company from Salesforce to Agentforce because we’re all getting so excited about Agentforce.” And I also told Mike that I really want to make sure all of you are there and to do what he can to put together an analyst briefing at Dreamforce, and I told him I pay for to have outstanding culinary shafts and maybe we can bring in some great entertainment for all of you to encourage you all to come.

So, I just gave him a huge budget to really motivate everyone, because I think this is going to be a moment that everyone is going to have to see in person to understand what is going on. And I’m going to explain that in a second because we’re going to show our new Agentforce agents and how we’ve reimagined enterprise software for this new world of autonomous AI. And every customer, I’m going to try to get every customer who comes to Dreamforce to turn agents on while they’re there. So, many of the customers, of course, are already using our applications.

You know that, OK? And of course, we’re automating all our customer touch points. That’s our Customer 360. And we’ve been talking now for the last couple of years about how we’ve really built this phenomenal Data Cloud that has really become, I would say, our fastest-growing, most exciting product ever up until one that we’re better to talk about, which is to help our customers amalgamate all the data that they need to really get their AI act and orders that gets their data and metadata integrated and then federate to other data sources. And then this critical third tier, which — this is the first call that we’ve ever talked about it, which is these agents.

And this idea that you’re not just going to have sales agents and service agents who probably read, heard maybe you saw in CBC, we’re building the agents for Workday and we’re going to be building custom agents for so many of you as well with Agentforce because it is a development platform as well as this incredible capability to radically extend your sales and service organizations. So, when you arrive at the Dreamforce campus, you’re going to see a big sign outside that says, humans with agents drive customer success together. And that’s because we now so strongly believe the future isn’t about having a sales force or a service force or a marketing force or a commerce force or an analytics force. The future is about also having an Agentforce.

And while many customers today don’t yet have agent forces but they do have sales forces or service forces, I assure you that within a year, we’re all going to have agent forces, and we’re going to have them at scale. And it’s going to radically extend our companies and it’s going to augment our employees, make us more productive. It’s going to turn us into these incredible margin and revenue machines. It’s going to be pretty awesome.

And this is really the future, a new future that we can really envision, and with this Agentforce platform, we’re making it easy to build these powerful autonomous agents for sales for service from marketing for commerce, automating the entire workflow on their own, embedding agents in the flow of work and getting our customers to the agent future first. And this is our primary goal of our company right now. This is my singular focus. So, at Dreamforce and on this call, you’re going to hear a lot of stories already of customers, and we’re going to talk about the customers who have it, customers like OpenTable and Wiley and ADP and RBC and so many others who are deploying these agents and running them on top of our Data Cloud and our apps.

And in fact, you’re going to hear about — I mean, at Dreamforce, you’re going to hear one of the very largest healthcare companies in the world. It’s got 20 million consumers here in the United States who is resolving more than 90% of all patient inquiries with Agentforce and they’re benchmarking us significantly higher than any other competing AI platform, and that’s based on some incredible AI breakthroughs that we have had at Salesforce. And I just have to call out the quality of our research team, our engineering team, and our product team because the accuracy of our results, the reduction of hallucinations, and the level of capability of AI is unlike anything I think that any of us have ever seen, and we’ve got some incredible new techniques, especially incredible new augmented RAG techniques that are delivering us the capability to deliver this accuracy with our — for our customers. In fact, one of these very large media companies that we work with, a lot of probably know who have everything, every possible media asset, while they’re just resolving 90% of all of their employee and consumer issues with Agentforce, pretty awesome.

So, there’s nothing more transformational than agents on the technology horizon that I can see, and Salesforce is going to be the first company at scale to deploy enterprise agents and not just any enterprise agents, the highest quality, most accurate agents in the world. Now, all of this with our continued focus on trust with customer success with innovation is driving the results that you see today. And in Q2, we’ve delivered $9.33 billion in revenue, up 8% year over year in nominal and 9% in constant currency. Subscription and support revenue grew at 9% year over year and 10% in constant currency.

And for the 11th year in a row, Salesforce ranked No. 1 CRM provider by the IDC Software Track. And of course, Salesforce is the No. 1 AI CRM, and we’d like to say we’re the third largest enterprise software company, but I was doing some calculations today, and I’d like you guys to do the calculations.

I think we just became the second-largest enterprise software company because we’re not delivering infrastructure or hardware, and we already passed Oracle in Japan as the second-largest enterprise software company, and I think we just did that. If you look at our enterprise software overall, we’re the largest enterprise software company in the world. So, we continue to see growth in multi-cloud deals. In fact, multi-cloud deals accounted for close to 80% of our new business in the quarter, and we’re just operating at this incredible scale, delivering 25 trillion Einstein transactions across all of the clouds during the quarter, that’s 25 trillion and more than 1 trillion workflows are now managing 250 petabytes of data for our customers.

We also continue to deliver on this incredible margin growth and so many of you have guided us through that incredible transformation. So, I just want to thank all of you for that. For the second quarter, our non-GAAP operating margin was 33.7%. That’s up 210 basis points year over year.

And you can see the incredible transformation that we’ve gone through over the last 24 months in margin and cash flow, which also was $892 million in the quarter, up 10% year over year. So, now, let’s turn to this financial guidance. For the fiscal year ’25, we continue to expect revenue at $37.7 billion to $38 billion, a growth of 8% to 9% year over year, and subscription and support revenue growth of approximately 10% year over year in constant currency. And as you can see from our results, we’ve remained committed to this very profitable growth at this incredible level of scale, and we’re raising our fiscal ’25 non-GAAP operating margin to 32.8%, a 230-basis-point improvement year over year.

And as I told you last quarter, we’re delivering incredible record cash flow this year, and I’m pleased that we’re also raising our operating cash flow guidance to 23% to 25% year over year. I’m also extremely proud of our team’s focus and determination deliveries, great results, and we’re going to hear more in a second. Now, as you know, and as you probably can tell from my narrative already, AI is not only my top-of-mind, but I can tell you, because I’ve met with hundreds of customers this quarter that it is the top of mind for every customer, for every CEO, for every CIO, but I want to tell you before I get into this, is that I think that there’s a lot of misconceptions about AI with my customers. I have been out there very disappointed with the huge amount of money that so many of these customers have wasted on AI.

They are trying to DIY their AI. It’s not selling like when we first saw cloud emerge or even some other technologies where they feel like they have to roll their own, build it themselves, get in the weeds, try to figure out and they’re not going to do it better than we’re going to do it. We’re a professional enterprise software company, this is what we do, and we do it with the trust and scale that they need. And this idea that our customers are going to have to build their own models, train their own models, retrain their own models, retrain them again and I’m meeting with these customers, and they’re so excited when they and they say, “Oh, I built this model, and we’re resolving 10%, 20%, 30%, 40% of this or that and whatever.” And I’m like, really, we’ll take a look at our models and our capability where you don’t have to train or retrain anything and you’re going to get more than 90%.

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