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Don’t Ask Einstein About Salesforce’s Latest Quarter

By
Jonathan Vanian
Jonathan Vanian
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By
Jonathan Vanian
Jonathan Vanian
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February 28, 2017, 7:57 PM ET
Photograph by Getty Images
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Salesforce’s revenue got a big bump in its latest quarter, but that wasn’t enough to win over Wall Street.

The business software company said Tuesday that its sales jumped 27% year-over-year in its fourth quarter, which ended Jan. 31. But the hefty growth won’t apparently continue into the first quarter, as the company projected first quarter earnings of 25 cents to 26 cents per share compared to Wall Street’s expectations of 30 cents.

The weaker-than-expected first quarter guidance caused Salesforce’s (CRM) shares to drop over 3.3 % in after-hours trading to $78.70. Investors appear to be concerned that Salesforce will be unable to continue its momentum leading into 2017.

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During a call with analysts on Thursday, several Salesforce executives urged investors to consider the company’s projections for the entire year of 2017, and not just for the first quarter. The company slightly increased its annual forecast from $10.1 to $10.15 billion in total sales for 2017, to $10.15 to $10.20 billion.

“We obviously feel good,” Salesforce CFO Mark Hawkins said about the revised outlook.

Hawkins attributed the weaker first quarter guidance to its strong fourth quarter, which is Salesforce’s biggest quarter for customer contract renewals. The “strong invoicing” that took place in the fourth quarter will likely not occur in the first quarter, he explained.

Still, Hawkins urged investors to take to heart the fact that the company “finished a very strong year” and lifted its 2017 guidance.

Several analysts on the call Tuesday peppered executives with questions about the recently introduced Einstein artificial intelligence services, pitched as a way to imbue its core sales software and other services with trendy, cutting edge AI techniques like deep learning. With Einstein, Salesforce claims its software services will be able to handle things like identifying potential sales leads better than before.

Analysts wanted to know whether Einstein would help increase sales in the near future.

Salesforce CEO Marc Benioff said that some of its customers use Einstein’s services for free while others pay to have it added to their existing Salesforce software. He said that Einstein’s biggest impact is that it helps differentiate Salesforce’s core sales software from competitors and therefore will help it win more customers in the future. But he gave no specific details about the new service’s current financial impact.

And for those waiting for Salesforce’s Einstein to talk like IBM’s data crunching service Watson, at least in its commercials with luminaries like Bob Dylan, they will have to wait.

For more about business software, watch:

Benioff joked that Einstein would answer a question from analysts, but then he returned to reality.

“No, we are not going to do that,” Benioff teased.

About the Author
By Jonathan Vanian
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Jonathan Vanian is a former Fortune reporter. He covered business technology, cybersecurity, artificial intelligence, data privacy, and other topics.

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