Salesforce spins itself as an AI revolution winner as Wall Street grows dizzy

Salesforce co-founder Marc Benioff likes to remind people that he is a part-time media mogul. On Wednesday afternoon, the tech billionaire offered some thoughts on OpenAI: “And then they [OpenAI] stole data from lots of companies like Time, Dow Jones, New York Times, Reddit.”

His tone was understandable. Benioff purchased the venerable Time Magazine for $190mn in 2018. But his bigger problem lies within the customer relationship software that Salesforce specialises in.

Shares of Salesforce fell by a whopping 20 per cent on Thursday, wiping roughly $50bn off its market value. Expected and projected revenues and bookings were softer than expected. Second-quarter sales should grow less than a tenth, a rare single-digit outlook.

But the elephant in the room remains artificial intelligence. Companies have finite IT budgets and the worry for big software companies is that client resources will shift towards shiny new AI-related products.

Benioff in his expansive comments, asked observers to take a deep breath and look at what he sees as the bigger picture. Things are not as bad as they might now seem. Salesforce’s annual revenues since the pandemic have surged from $20bn to nearly $40bn. Salesforce clients, Benioff noted, were still absorbing a huge amount of new IT and software that they had taken on in the past four years.

That has distracted its customers, not to mention Salesforce itself. The software group in 2020 had 57,000 employees. That ballooned eventually to nearly 80,000. After an intense activist campaign from Elliott Management last year the workforce is down to closer to 70,000.

Elliott had urged Benioff to slash bloated overheads and focus on profit margins and capital returns. Initially that ploy was successful. Shares of Salesforce doubled in 2023, after a disappointing 2022.

But now low-hanging fruit has been plucked and some existential fears have appeared. Like every tech boss not named Jensen Huang, Benioff insists his company will also be a big winner in the AI revolution.

Benioff projects that the AI models, even with their clever user interfaces, will become commoditised. Instead, his clients will benefit from Salesforce software. The data it harvests for clients will be the real lifeblood of whatever AI model companies seek to use in the future.

All publishers need to understand the power of a compelling narrative. But for now, not many are buying Benioff’s.

sujeet.indap@ft.com