Salesforce Q1 Earnings: CEO Benioff Calls AI Models Commodities, Data ‘The New Gold’

“Customer data and metadata are the new gold for these enterprises,” Salesforce CEO Marc Benioff said Wednesday.

Salesforce executives played up growth in the vendor’s artificial intelligence offerings while acknowledging continued “measured” customer buying patterns including longer sales cycles and smaller during the fiscal 2025 first quarter.

Marc Benioff, CEO and co-founder of the San Francisco-based customer relationship management (CRM) application vendor, told analysts on Wednesday’s call – covering the quarter ended April 30 – that generative AI models are merely commodities and “not where the intelligence lies.”

“Customer data and metadata are the new gold for these enterprises,” Benioff said on the call. “We'll be using different models and different UIs [user interfaces] over the years, but we'll be using the same deep data sources. And I think that is why, when I look at what Salesforce is doing, this is going to be critical for our customers.”

[RELATED: Salesforce Drops $11B Informatica Acquisition Pursuit: Reports]

Salesforce Q1 Earnings

Salesforce, which has about 12,000 partners worldwide, manages around 250 petabytes of customer data, including data that “provides the attributes and context the AI models need to generate accurate, relevant output,” Benioff said. This makes the vendor a key player as businesses continue to adopt AI.

AI models alone “don't know anything about a company's customer relationships,” he said. “Seventy-five percent of the value of GenAI use cases is in the front office. And everybody knows Salesforce is the leader in front office software. That's our fundamental premise for our growth going forward.”

Measured Buying Environment

Brian Millham, Salesforce president and chief operating officer, told analysts on the call that the vendor sees “good demand as AI technology rapidly evolves and customers recognize the value of transforming into AI enterprises,” but “we continue to see the measured buying behavior similar to what we have experienced over the past two years.”

The momentum Salesforce experienced in the last quarter of the 2024 fiscal year moderated in the latest quarter, Millham said.

“We saw elongated deal cycles, deal compression and high levels of budget scrutiny,” he said. “In addition, in Q1 as part of our ongoing transformation, we made some intentional changes in our go-to-market organization to drive long-term productivity and create better customer experiences, which also played a role in the softer bookings performance.”

Some deals Salesforce ended up getting done during the quarter were “smaller when we ultimately closed them,” Millham said. He saw “a couple of deals push out of the quarter as people delayed decisions that we thought would actually happen in our first quarter. This no-decision issue is coming up more frequently than we anticipated.”

The Americas and Europe, the Middle East and Africa (EMEA) felt more constrained compared to other geographies, Millham said. Technology, small and midsize businesses, and “and other areas of transactional business” are expected to see continued constraint.

Salesforce President and Chief Financial Officer Amy Weaver said that the deal compression and project delays contributed to an expected revenue headwind in professional services. “Customers are really just looking for shorter duration projects,” she said.

Although the measured buying environment has lasted about “two full years at this point,” Weaver said, “we continue to see good demand on multi-cloud adoption, we're seeing benefits from pricing and packaging changes that we have rolled out over the past year [and] we're seeing very healthy adoption around our industry projects.”

Customers who went on a software buying spree during the pandemic now “look to actually rationalize it, ingest it, integrate it, install it, update it” post-pandemic while layering in AI capabilities and preparing data estates, Benioff said.

One of the efforts Salesforce has taken to perform better in the measured buying environment is starting quarters with higher pipelines, the CEO said.

“Where traditionally we might have started our pipelines at 2x, now our message to our distribution leaders is, ‘Hey, if you're going to start out your pipeline in the quarter, you better start out at 3x,’” Benioff said. “And this is also our message to our peers as well – to evaluate the pipeline much more aggressively than ever before. That means a much deeper inspection of the pipeline but holding it at a much higher level.”

OpenAI Shade, AI Competition

Throughout the call, Benioff told analysts that Salesforce is separated from the growing AI competition because of the data it manages.

Other AI vendors “may say they have this capability or that capability, this user interface, that model, that whatever – all of these things are quite fungible and are expiring quickly as the technology rapidly moves forward,” he said. “But the piece that will not expire is the data. The data is the permanent key aspect.”

Benioff told analysts on the call that he has been using Microsoft-backed OpenAI’s new GPT-4.0 model, calling it “pretty magical.”

But then he shamed the organization behind ChatGPT and Dall-E, saying that OpenAI “stole data from lots of companies like Time [which Benioff owns], Dow Jones, New York Times, Reddit. And now they're all making good, doing agreements with all of us, saying we're sorry, and paying for it.”

“For all companies – including ours, others – who want to deploy generative AI internally, it's not just going to be Time Magazine that's going to give you the intelligence,” Benioff said. “It's going to be your customer data and your transaction history and how your company operates in your workflow and your metadata. And that idea that we can deliver another level of productivity for companies using that architecture is absolutely in front of us... That data needs to be stored somewhere. And it needs to come from somewhere. That is going to be something that's going to continue in perpetuity over time.”

AI Product Updates

Salesforce’s Data Cloud unified data platform helps businesses unify data trapped in thousands of applications and silos, Benioff told analysts on the cloud.

Some Data Cloud data points Benioff shared include:

“It is the engine of our future growth, and this is the engine of our future artificial intelligence growth as well,” Benioff said.

The growth of Data Cloud points to customers “getting their data estate in order as a precursor to leveraging AI capabilities,” Millham said. “Customers [are] really wanting to bring together many data sources so they can leverage AI in the flow of work … it's actually a step process for many of our customers – ‘Let's get our data in order. And then let's layer in the AI to really drive the productivity gains that we expect.’”

Salesforce’s Einstein AI technologies now generate hundreds of billions of predictions per day and trillions per week, Benioff said. Thousands of customers are powering generative AI use cases with Einstein Copilot, Prompt Builder and Einstein Studio, all products that went live in the first fiscal quarter.

Hundreds of copilot deals have closed since it became generally available April 25, Benioff said. Millham told analysts that Slack users have leveraged AI to summarize more than 28 million messages since its February launch.

Salesforce added 2,300 new customer logos to Starter and Pro Suite, its new, ready-to-use, simplified products with AI built in aimed at small and medium businesses (SMB), Weaver said on the call.

M&A On The Horizon

When asked about Salesforce’s mergers and acquisition strategy following rumors of interest in buying Informatica, Benioff said that Salesforce “will continue to look at products inorganically” as well as innovating within the company.

“If we're looking at a large-scale acquisition, we're going to make sure that it is not dilutive to our customers, that it's accretive, that has the right metrics,” he said. “And we're also going to be quick to walk away from things that we are not totally confident in or that we don't have the trust with whatever company that we're looking at. So, we have operated inside that framework. … I don't think any company has been more successful with M&A than Salesforce has been.”

Salesforce closed its acquisition of incentive compensation management (ICM) software provider Spiff on Feb. 1.

Q1 In Depth

Salesforce reported revenue of $9.13 billion during the quarter, an increase of 11 percent year over year.

CFO Weaver said the revenue “was at the lower end of our guidance range due to containment pressures on professional services, some license revenue volatility and the continued measure buying environment.”

Industry-wise, public sector and financial services performed well. High tech, retail and consumer goods were more constrained, she said.

Subscription and support revenue was $8.59 billion, up 13 percent year over year ignoring foreign exchange. “This included the tailwind and the timing of license revenue in MuleSoft and Tableau related to Q4 deals and a one-point benefit from the leap year,” Weaver said.

Salesforce’s current remaining performance obligation (cRPO) was $26.4 billion, up 10 percent year over year. RPO was $53.9 billion at the end of the quarter, up 15 percent year over year.

The vendor posted operating cash flow of $6.25 billion for the quarter, up 39 percent year over year. Free cash flow was $6.08 billion, up 43 percent year over year. “We have more than tripled the cash we generated just four years ago,” Weaver said.

Salesforce’s stock fell about 16 percent after market close, trading at about $228 a share.

Nearly half of the vendor’s top 50 wins in the quarter included six or more clouds, Benioff said on the call.

Six of its top 10 deals included six or more clouds, Millham said. Slack was included in nearly half of the top 50 deals in the quarter. Half of Salesforce’s top 10 deals included one of its industry clouds.

Performance Guidance

Salesforce executives told analysts to expect revenue in the current (fiscal 2025 second) quarter between $9.2 billion and $9.25 billion, an increase of between 7 percent and 8 percent year over year.

Although Weaver told analysts on the call that “we are assuming that the conditions we saw in Q1 continue throughout our fiscal year, the vendor maintained its projected full fiscal year revenue of $37.7 billion to $38 billion, which would mark a year-over-year increase of 8 percent to 9 percent.

Salesforce lowered its expected full fiscal year revenue for subscription and support to about 10 percent year over year excluding foreign exchange.