Salesforce shares rose 12% in extended trading Wednesday after the company reported fiscal second-quarter adjusted earnings of $5.90 a share, nearly double the $3.27 consensus, on revenue of $11.35 billion that barely cleared the $11.32 billion estimate. The beat was written almost entirely by a $2.6 billion gain on the company’s stake in Anthropic, which lifted net income 87% year over year to $3.53 billion, or $4.29 a share on a GAAP basis. Strip out the investment windfall and the quarter looks more like a modest top-line beat with a free cash flow print of $1.10 billion, 81% above the $643 million StreetAccount consensus, that Alphabet and Microsoft also got to book this season.
The Anthropic windfall
Anthropic’s May funding round valued the startup at $965 billion, turning Salesforce’s early stake into a paper profit that now flows through the income statement. The gain accounts for the vast majority of the adjusted EPS surprise and makes the year-over-year earnings comparison all but useless for modeling purposes. Free cash flow jumped 81% to $1.10 billion, well ahead of expectations, though the company did not break out how much of that cash generation came from operations versus the investment markup.
Guidance moves higher
For the fiscal third quarter Salesforce guided adjusted EPS of $3.42 to $3.44 on revenue of $11.42 billion to $11.50 billion, both above the $3.38 and $11.41 billion consensus. Full-year revenue guidance was lifted to $46.1 billion to $46.4 billion from the prior $45.9 billion to $46.2 billion range, implying 11% growth at the midpoint. The raise is incremental, roughly $200 million at the midpoint, but it signals confidence that the Anthropic tailwind and the Agentforce ramp can offset the softness appearing elsewhere.
Agentforce accelerates while integration stumbles
Annualized revenue from Agentforce AI products hit $1.5 billion, up 240% year over year, accelerating from the 200%-plus growth rate reported a quarter earlier. At the same time, chief operating and financial officer Robin Washington acknowledged “headwinds and volatility” selling licenses for integration and analytics software on the earnings call. Current remaining performance obligation, a proxy for near-term revenue visibility, came in at $33.5 billion versus the $33.22 billion StreetAccount estimate, a beat, but a narrow one.
The SaaSpocalypse that wasn’t
The stock closed the regular session down 22% year to date while the S&P 500 gained 12%, a divergence driven by the debate over whether generative AI models will eat traditional software. Marc Benioff dismissed the thesis on the call: “This is not the SaaSpocalypse. We’ve been hearing about this for last two quarters, these dire predictions about the end of software and how the models eat everything, but none of them have come true for us.” The company also announced a Claude plugin for sales workflows, a $1.6 billion Veterans Affairs contract, and a $3.6 billion acquisition of customer service startup Fin expected to close this quarter.