According to Zhitong Finance APP, the cloud software giant Salesforce (CRM.US), focused on customer relationship management (CRM) software, recently announced quarterly performance data that exceeded general expectations of analysts. After several consecutive quarters of disappointing performance, the latest results and the management's positive outlook for the future undoubtedly greatly enhance investors' confidence that the company's heavily promoted ai application software product strategy will improve actual financial performance. Salesforce's performance also highlights that the recent investment focus in the global equity market around ai has shifted from semiconductors to software stocks, which is not mindless speculation, but rather the market betting that these software companies will have even stronger revenue data as a core pillar amidst the epic ai boom.

On Tuesday, Salesforce stated in its earnings announcement that for the third quarter of its fiscal year 2025, ending October 31, the company's revenue grew by 8.3% year on year to 9.44 billion USD, surpassing the average expectation of Wall Street analysts of approximately 9.35 billion USD. The company's non-GAAP operating margin (an important indicator of profitability) for the third quarter was 33.1%, exceeding analysts' average expectation of approximately 32.2%, with a year-on-year expansion of 190 basis points. The operating margin under GAAP was 20%, with a year-on-year expansion of 280 basis points. After the financial report data was released, Salesforce's stock price rose over 10% in post-market trading.

Salesforce's financial report for the third quarter shows that the current remaining performance obligations (CRPO, a measure of booked sales) is approximately $26.4 billion, a 10% year-on-year increase; operating cash flow in the third quarter is approximately $1.98 billion, up 29% year-on-year.free cash flowIt is around $1.78 billion, a 30% year-on-year increase.

In terms of performance outlook, Salesforce's management expects that for the first quarter ending in January, the sales range will be approximately 9.9 billion USD to 10.1 billion USD, implying a year-on-year growth of 7% to 9%, which is basically consistent with analysts' average forecast; management expects the current remaining performance obligations for the next quarter to grow by approximately 9% year on year, which is basically in line with analyst expectations. Additionally, the company's management maintains the overall sales growth expectation for the subscription and support business for the full fiscal year 2025, that is, an approximate year-on-year growth of 10%.

The ai software application products under Salesforce have begun to contribute to earnings growth.

Salesforce is the top global seller of customer relationship management cloud software, which has been increasingly focused on the application of ai since the beginning of this year. From the second and third fiscal quarter reports, it is evident that Salesforce has made substantial investments in ai computing infrastructure (primarily nvidia AI GPUs), which are finally starting to contribute to profits. Its ai application software products are rapidly penetrating major enterprise customers, forming the core logic of the company's positive growth in performance and outlook.

This software giant is also striving to shift its ai strategy towards the cutting-edge ai application tool called "AI Agents." The main purpose of this currently popular ai tool is to accomplish tasks like customer support or sales development without human supervision, and it can even take part in large tasks such as software development projects. This San Francisco-based software giant officially launched its ai agent-focused software service product "Agentforce" in October, with an initial product pricing of approximately $2 per ai Agent conversation.

Since continuously laying out generative ai technology in 2023, Salesforce has integrated this new ai technology into its CRM cloud software solutions to provide smarter and more personalized customer relationship management (CRM) and business applications. For instance, Salesforce has launched the ai comprehensive platform called "Einstein," which adds generative ai functionality to the CRM and business application software for enterprises. Einstein leverages generative ai large models, machine learning, and natural language processing technologies to help businesses develop customized ai application software, predict customer behavior, provide personalized recommendations, and automate tedious tasks using ai.

Among them, Einstein Copilot is an important ai functionality module for Salesforce, serving as a generative ai-based intelligent assistant similar to ChatGPT. It allows enterprise customers to quickly obtain professional technical support and access various resources of the CRM cloud platform through a simple chat interface. In Salesforce's core applications like Sales Cloud and Service Cloud, Einstein Copilot provides real-time conversational ai services, offering professional sales advice, customer support responses, and professional data analysis. Einstein Studio is a one-stop ai developer platform provided by Salesforce for developers, allowing enterprise users to customize and fine-tune ai large models, enabling a low technical threshold for rapid development of enterprise-level ai applications to meet specific business needs.

The newly launched Agentforce from Salesforce is a brand new integrated ai software platform with highly customizable attributes, aiming to provide highly autonomous ai agents. Its ai reasoning capability and the ability to automate complex and tedious tasks greatly exceed that of Einstein Copilot, allowing users to connect enterprise data and easily automate various tasks across sales, service, marketing and other areas. Agentforce enables users to create fully autonomous ai agents that can independently execute complex tasks without any ongoing human intervention. These agents can utilize enterprise data and the core application software system of Salesforce for decision-making, handling a range of tasks from simple to extremely complex.

Salesforce CEO Marc Benioff expressed great confidence in the sales outlook for Agentforce last month, stating that Salesforce may add over 1,000 employees to sell this latest ai tool. Before the planned surge in hiring, the company had significantly cut operating costs for nearly two years, mainly including layoffs and other measures, as Benioff endeavored to control expenditures and strive for increased profitability under pressure from activist investors.

The company's executive vice president Mike Spencer stated in an analyst interview after the financial report release that Salesforce has signed a "significant number" of enterprise deals related to Agentforce. However, he added that these deals are primarily in the initial rollout phase and will take some time to be reflected in the company's performance reports.

"I believe everyone knows that the performance of this quarter is not what we're truly excited about," Benioff told analysts on the conference call after the financial report was released. "While the results of this quarter are indeed outstanding, what is truly exciting is the impact that the technology brings."

Salesforce's stock price has fluctuated greatly this year, hitting a temporary low of $218.01 on May 30, prior to the company estimating that sales growth would represent the slowest expansion rate in history. Furthermore, in the first half of this year, the AI monetization prospects for software giants like Salesforce appeared very unclear due to the continued heavy spending on purchasing nvidia's AI GPUs.

However, since then, due to Salesforce's financial report showing that its ai application software is beginning to accelerate penetration into major enterprise clients, combined with the global stock market's investment frenzy surrounding AI shifting towards well-known software stocks like AppLovin (APP.US), Salesforce's stock price rebounded significantly by over 50%. Citi's star analyst, Tyler Radke, wrote in a report prior to the earnings announcement: "AI applications and AI agent tools have completely replaced CRM narrative logic." Citi assigned a 12-month target price of up to $368 for Salesforce, while another Wall Street investment bank, Piper Sandler, set a target price as high as $395.

Anurag Rana, an analyst at Bloomberg Intelligence, stated after Salesforce's earnings report that the higher-than-expected operating margin was the standout figure in the results.

Additionally, Salesforce's third quarter financial report indicated that sales from its business sectors, including marketing and e-commerce software, grew by 8% year-on-year when calculated at fixed exchange rates, slightly exceeding Wall Street analysts' expected growth rate. Recently, Canadian e-commerce giant shopify, which focuses on one-stop construction for e-commerce platforms, stated that its competing e-commerce software service, Commerce Cloud, has attracted hundreds of enterprise clients from Salesforce, intensifying the competition between the two in the e-commerce field.

AI is no longer just a gimmick! Software giants like AppLovin tell investors that AI software will be the core revenue path for AI.

This year, the stock price has surged an astonishing 820%, far exceeding the "AI super stock" nvidia - that is, the mobile advertising marketing and mobile application technology development company AppLovin (APP.US), which has driven a global investment frenzy around artificial intelligence from semiconductors to software stocks due to explosive stock price growth and explosive earnings growth. This also represents the core logic behind the recent sharp rise in the stock prices of AI application sector leaders in the usa, europe, and a-shares in hk.

These technology companies focused on AI software have made significant progress in monetization and commercialization capabilities in recent times, gradually revealing their strengths and stimulating the financial market's "FOMO sentiment". It is understood that leveraging AI advertising software solutions, AppLovin excels at efficiently matching supply and demand across massive advertising auctions. The company launched its AI advertising engine model AXON 2.0 and developed intelligent advertising software solutions based on it, simultaneously offering "AI+ advertising marketing" services to advertisers and application developers (ad publishers).

With the gradual formation of ai computing power resources covering artificial intelligence hardware infrastructure and large models, AppLovin has begun to provide global enterprises with "AI+ advertising marketing solutions" based on artificial intelligence technology, covering functions such as user reach, traffic monetization, advertising creative design, and marketing data detection. On November 7, AppLovin released its third-quarter report, which significantly exceeded market expectations, with quarterly revenue of approximately $1.198 billion, a year-on-year increase of 39%; net income reached $0.434 billion, a year-on-year surge of 300%.

According to a survey of 800 large enterprise business leaders, over the past year, the application of generative ai has rapidly infiltrated various day-to-day operations of businesses, extending from information technology to human resources, and ai is no longer just a simple marketing gimmick. According to a report from the Wharton School of the University of Pennsylvania and marketing consulting firm GBK Collective, about 72% of business decision-makers reported using generative ai at least once a week, an increase from 37% in the first year of the survey in 2023.

The report found that businesses have moved beyond the initial hype and surprise surrounding generative ai to more practical applications. The most cited uses include writing and editing documents and proposals, accounting for 64% of all respondents, followed by data analysis and analytics at 62%. Other features mentioned by more than half of the decision-makers include customer service and support, fraud detection and prevention, as well as financial estimates and planning.

A research report released by international banking giant ubs group shows that the global technology industry has just begun a large-scale performance growth cycle. ubs expects that by 2027, ai technology will achieve extremely widespread application in various industries across major economies, thereby pushing the ai large models and ai software applications to become a segmented market valued at 225 billion dollars, a massive leap compared to only 2.2 billion dollars in 2022, with a compound annual growth rate expected to reach 152%. ubs also predicts that the total revenue scale of the ai industry will increase 15-fold, rising from approximately 28 billion dollars in 2022 to 420 billion dollars in 2027.