Software giant Salesforce's earnings exceeded expectations, but revenue and outlook fell short, dropping over 7% in after-hours trading | Earnings report insights

The latest quarterly revenue forecast outlook released by Salesforce, a software industry giant headquartered in San Francisco, fell short of expectations, disappointing the market regarding the prospects of its new AI products. As a barometer of technology spending in the software industry, Salesforce's lower-than-expected revenue outlook is seen as the latest warning sign.

The financial report released after U.S. stock market hours on Wednesday showed that Salesforce's fourth-quarter EPS exceeded expectations, but revenue fell short:

The adjusted EPS for the fourth quarter was $2.78, while analysts had expected $2.61.

Net profit for the fourth quarter increased from $1.45 billion in the same period last year to $1.71 billion.

Fourth-quarter revenue was $9.99 billion, compared to analysts' expectations of $10.04 billion. Revenue for the quarter grew by 7.6% year-on-year, marking the third consecutive quarter of single-digit growth for the company, whereas Salesforce had previously maintained a faster growth rate.

The adjusted operating profit for the fourth quarter was $3.30 billion, slightly above analysts' expectations of $3.29 billion.

In terms of business segments, Salesforce's subscription and support revenue for the fourth quarter reached $9.45 billion, while analysts had expected $10.04 billion. Among these, the largest category, service revenue, recorded $2.33 billion in the fourth quarter, growing by about 8%, while analysts had expected $2.37 billion; fourth-quarter sales were $2.13 billion, also growing by about 8%, compared to analysts' expectations of $2.17 billion.

Salesforce's guidance for the first quarter fell short of expectations, dampening investor optimism about its new AI products:

The company expects first-quarter revenue to be between $9.71 billion and $9.76 billion, while analysts had expected $9.91 billion.

For the fiscal year ending January 2026, the company expects revenue to be between $40.5 billion and $40.9 billion, while the average analyst expectation is $41.5 billion.

The adjusted operating profit margin is expected to be around 34%, slightly higher than the average analyst estimate of 33.9%.

As a result of this news, Salesforce's stock price fell more than 7% in after-hours trading on Wednesday, although it later recovered all of its losses. Over the past 12 months, the stock has underperformed compared to many other software companies.

As a leader in global customer management software, Salesforce has recently been heavily promoting its "Agentforce" product, which aims to automate customer service tasks without human intervention. This product was launched in October last year but faces fierce competition from companies like Microsoft and ServiceNow, which are also advancing similar AI automation visions.

Despite the disappointing latest performance guidance, Salesforce continues to heavily promote its Agentforce product, claiming that it has completed 5,000 transactions. The company's CEO, Marc Benioff, stated that Agentforce performed exceptionally well in this quarter. He mentioned that clients including Pfizer, Singapore Airlines, and fitness chain Equinox are using the product.**

In addition, investors have expressed concerns about the uncertainty brought about by changes in the company's executives. Amy Weaver, who has long served as Chief Financial Officer, and Brian Millham, Chief Operating Officer, will both be leaving. Robin Washington, a veteran in the tech industry who has been a member of the Salesforce board since 2013, will take on the newly established role of Chief Financial and Operations Officer.

Earlier this month, Salesforce cut more than 1,000 jobs to allocate more funds to AI-related projects. Additionally, the company awarded a $2.5 billion cloud computing contract to Alphabet, Google's parent company, to expand its cloud infrastructure partnerships beyond just Amazon AWS