If you tend to spend any time analyzing stock market data, you may have been struck by the sudden surge in Salesforce shares on Tuesday morning. Per reports, the shares saw a more than 12 percent single-day rise as Salesforce’s third-quarter earnings were reported in full. Not only did the corporation, listed as CRM on the New York Stock Exchange, manage to out-earn their Q3 projections in 2024, their recent pivot to artificial intelligence has led analysts to project significant additional growth in quarter 4 and beyond. Expectations for fourth-quarter sales have now been reported at highs of over $10 billion. Though these figures seem massive in scope, some analysts have successfully predicted this rise, as Salesforce has been on a financial uptick throughout all of 2024.
To understand why these figures are significant, and what this means for the Salesforce market moving forward, we’ll have to take a brief look at the company’s existing business model, financial structure, and recent pivot into artificial intelligence. With any luck, we’ll be able to analyze the trajectory of Salesforce stock for the foreseeable future, in order to ensure that our respective financial portfolios are in the right place. With no further preamble, let’s dive right in, and see what we can learn from the shocking over performance of Salesforce stock.
What Is The Business Model Of Salesforce?
According to the company’s own official website, Salesforce is a business to business customer relationship management service which primarily operates via the cloud. In essence, Salesforce helps large business entities to create easily accessible communication platforms between bosses, employees, peers, and consumers. The company, which launched its initial public offering back in 2004, has previously acquired such platforms as Trailhead and Slack, and has partnered with Meta to develop applications including WhatsApp. If you’ve ever used instant messaging to communicate with your boss, or even messaged an AI customer service rep through an online portal, you have personally interfaced with Salesforce’s platform or one created by its competitors.
Needless to say, this makes Salesforce an integral element of any business which partners with it, while serving as a middle-man for billions in quarterly revenue. As mentioned above, Salesforce has recently announced their intention to go all-in on artificial intelligence, which should help to relive the human staffing requirements of online businesses all over the world. To some, this is a major problem, as it leaves the jobs of millions of customer service representatives at stake. To others, however, this presents a bold new opportunity to let AI handle low-level customer care prompts, freeing up revenue to spend on product testing, design, and other areas of focus.
How Have Salesforce Employees Been Impacted?
With billions of dollars in revenue flowing through Salesforce, you may expect that employees of the massive company are receiving large bonuses for all their hard work. While many shareholders are quite excited at the direction of the company, lower level employees have unfortunately been laid off in droves over the course of the last few years. According to a January 2024 report in Bloomberg, the corporation announced plans to lay-off hundreds of employees over the course of the following fiscal year, accounting for more than 1 percent of their global staff. This news came just one year after Salesforce began mass layoffs of up to 8,000 employees in 2023, citing aggressive over-hiring policies following the COVID-19 pandemic.
The release of thousands of employees, combined with the hard pivot into AI technology, also allowed Salesforce to significantly downsize their office space requirements, saving them overhead from rent and utility bills on a monthly basis. While these factors are not the primary reason for Salesforce’s massive growth in Q3, they do account for a significant portion of financial success, as parsed out during the most recent earnings call.
How Much Is Salesforce Currently Worth?
Obviously, stock market trends can vary wildly by day, though Salesforce is currently experiencing a 52-week high of $367.87 per share, according to Benzinga. As Q3 earnings became fully processed, these figures accounted for a total revenue of $9.44 billion. Most financial analysts previously projected Salesforce to round out the season with $9.34 billion, meaning the business brought in over $100 million above conservative projections. According to a report in CNBC, Salesforce CEO Marc Benioff explained “We delivered another quarter of exceptional financial performance across revenue, margin, cash flow, and cRPO. Agentforce, our complete AI system for enterprises built into the Salesforce Platform, is at the heart of a groundbreaking transformation.” If Benioff is correct, Salesforce will be on pace to bring in over $10.10 billion in Q4, representing meteoric growth in fiscal year 2024 and beyond.
