Salesforce’s weak forecast shows AI monetization struggles despite $20B buyback

Salesforce forecast third-quarter revenue below Wall Street estimates on Wednesday, signaling lagging monetization for its highly-touted artificial intelligence agent platform as clients dial back spending due to macroeconomic uncertainty.

The cloud software provider also announced a $20 billion increase to its existing share buyback program, but that was unable to allay investors' concerns, sending Salesforce's shares down over 5% in extended trading.

Since OpenAI's ChatGPT launched in 2022, Salesforce has adopted artificial intelligence on a wide scale, integrating it into its various cloud services and creating an AI agent platform called Agentforce to automate tasks in the hopes of streamlining operations and boosting margins.

Investors are on the heels of cloud firms to show returns on the billions poured into AI, while an uncertain macro environment and volatile customer spending weigh on growth prospects.

"Investors may feel a sense of frustration, especially as they contemplate the timeline for adequate returns on AI investments, said Melissa Otto, head of research at S&P Global's Visible Alpha.

The company has returned to its strategy of acquisitions to expand its existing cloud offerings, potentially inviting activist investor scrutiny.

"As Salesforce brings more acquisitions into the fold, it will be able to offer even more intelligent agentic capabilities to customers," said Rebecca Wettemann, CEO of industry analyst firm Valoir.

CEO Marc Benioff said last week that Salesforce has cut 4,000 jobs in customer support due to AI, after earlier saying that the technology accounts for about 30% to 50% of the company's work.

For the third quarter, Salesforce sees revenue between $10.24 billion and $10.29 billion, with the midpoint coming below analysts' average estimate of $10.29 billion, according to data compiled by LSEG.

On an adjusted basis, Salesforce expects earnings per share between $2.84 and $2.86, the midpoint of which is in line with analysts' estimates.

Second-quarter revenue was $10.24 billion, beating expectations of $10.14 billion.