Salesforce, a leading provider of customer relationship management (CRM) software, is pushing back against concerns of a widespread downturn in the software-as-a-service (SaaS) sector, despite a revenue forecast that fell short of analyst expectations. Chief Executive Marc Benioff dismissed talk of a “SaaS-pocalypse” as investors grapple with the potential disruption posed by artificial intelligence (AI).
The company on Wednesday , reported full-year revenue guidance between $45.8 billion and $46.2 billion, slightly below the $46.1 billion consensus estimate from S&P Visible Alpha. This shortfall contributed to a 5% drop in the company’s stock price in after-hours trading.
The anxieties surrounding Salesforce and its peers – including Intuit, Workday, and ServiceNow – stem from the rapid advancement of AI and the emergence of new companies like Anthropic, which are challenging established software vendors. Investors are questioning whether the traditional SaaS model can withstand competition from AI-driven solutions.
Benioff, however, remains optimistic. He argued that AI is actually bolstering the SaaS market, coining the term “SaaS-quatch” to describe the potential for AI to consume and enhance existing SaaS offerings. “If there is a ‘SaaS-pocalypse’, it may be eaten by the ‘SaaS-quatch’ because there are a lot of companies using a lot of SaaS because it just got better with agents,” he told investors during the earnings call.
He highlighted the growing adoption of Salesforce’s “agentic” AI tool, Agentforce, which automates tasks and handles customer service interactions. Benioff also pointed out that companies at the forefront of AI development, such as Anthropic, rely heavily on Salesforce’s platforms. “Anthropic runs its whole operation on Salesforce and Slack. I think every AI company does,” he added.
Despite Benioff’s confidence, Salesforce’s shares have declined by approximately 27% this year, reflecting broader market concerns about the impact of AI on the software sector.
The fourth-quarter earnings report revealed revenue of $11.2 billion for the three months ending , meeting expectations. However, operating profits of $1.9 billion fell short of the $2.1 billion analysts had predicted.
A key driver of growth for Salesforce is its AI-powered products, Agentforce and Data 360. These offerings generated $2.9 billion in annual recurring revenue, a significant increase from $1.4 billion in the previous quarter. This growth was partially fueled by the $8 billion acquisition of Informatica, a cloud data business, in late .
Salesforce is also navigating the complexities of pricing its AI services. Traditionally, the company has used a “per-seat” licensing model, which provides customers with predictable costs. However, some AI start-ups are adopting consumption-based or outcome-based pricing models, potentially offering greater flexibility and value.
Benioff has defended the per-seat model, emphasizing its predictability for customers. This contrasts with the approaches taken by rivals like Sierra, founded by former Salesforce co-CEO Bret Taylor, which promotes outcome-based pricing.
In an effort to bolster investor confidence, Salesforce announced a $50 billion share buyback program, following a $23 billion repurchase program last year. The company also increased its dividend.
However, Salesforce has also faced internal challenges. Benioff’s recent public comments on immigration and law enforcement have drawn criticism from employees, including senior executives. He invited employees attending a company event in Las Vegas to identify themselves, noting that Immigration and Customs Enforcement agents were present.
These remarks prompted a strong response from Rob Seaman, general manager of Slack, who stated that Benioff’s comments did not align with his personal values or those of many other employees. Several senior figures have left Salesforce in recent months, including Slack CEO Denise Dresser, who joined OpenAI as chief revenue officer.
The situation highlights the delicate balance Salesforce must strike between navigating a rapidly evolving technological landscape, addressing investor concerns, and maintaining employee morale. While Benioff dismisses the notion of a “SaaS-pocalypse,” the company’s performance and internal dynamics suggest that the future of the software industry remains uncertain.
