☁️ Salesforce: The Agent Wave
Is AI a double-edged sword for software incumbents?
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Salesforce (CRM) soared 11% after reporting its October quarter.
While the quarter delivered steady growth and margin expansion, it’s Salesforce’s early success with Agentforce—a platform for building and deploying autonomous AI agents—that has captured Wall Street’s attention.
AI is reshaping enterprise software—and not always in predictable ways.
Take Klarna, for example. The payments giant recently terminated its Salesforce contract to build its own AI solution in-house. For Salesforce, this reflects the double-edged nature of AI: it creates immense opportunities but can also disrupt specific use cases, introducing unforeseen competition.
Yet Salesforce’s new Agentforce platform tells the other side of the story. Within weeks of its launch, it secured hundreds of deals, proving that AI isn’t just a threat—it’s also a powerful tailwind. Both narratives can coexist: AI presents new challenges for incumbents but also drives significant innovation and growth.
Salesforce aims to deliver actionable AI that transforms how businesses operate, and we just learned how the company plans to monetize the agent wave.
Let’s review.
Today at a glance:
Salesforce’s Q3 FY25.
Agentforce’s playbook.
Key quotes from the call.
What to watch looking forward.
1. Salesforce Q3 FY25
Salesforce’s fiscal year ends in January, so Q3 FY25 was the October quarter.
Income statement:
Revenue has two main components:
🧾 Subscriptions and support (~94% of overall revenue).
Sales (22%): Manage and automate sales process from leads to opportunities to billing.
Service (24%): Deliver personalized customer service and support.
Platform & Other (19%): Automate processes and build business apps. This segment also includes Slack, acquired in 2021 for $28 billion.
Marketing & Commerce (14%): Plan, personalize and optimize one-to-one customer marketing journeys.
Integration & Analytics (14%), previously called Data segment. It includes Mulesoft (acquired in 2018 for $7 billion) and Tableau (acquired in 2019 for $16 billion).
⚙️ Professional services and other (~6% of overall revenue).
Help customers achieve business results faster with Salesforce solutions.
Revenue grew +8% Y/Y to $9.4 billion ($90 million beat).
Gross margin was 78% (+2pp Y/Y).
Operating margin was 20% (+3pp Y/Y).
Non-GAAP operating margin was 33% (+2pp Y/Y).
Non-GAAP EPS $2.41 ($0.04 miss).
Cash flow:
Operating cash flow was $2.0 billion (+29% Y/Y).
Free cash flow was $1.8 billion (+30% Y/Y).
Balance sheet:
Cash and cash equivalents: $12.8 billion.
Debt: $8.4 billion.
FY25 Guidance:
Revenue +8-9% Y/Y to $38 billion (low end slightly raised).
GAAP operating margin 19.8% (+0.1pp raise).
Non-GAAP operating margin 32.9% (+0.1pp raise).
So what to make of all this?
Growth momentum: The revenue beat was similar to the previous quarter. Current Remaining Performance Obligations, which represents the next 12 months of revenue under contract—grew 10% in constant currency, barely a slowdown from the 11% growth in Q2.
Slight guidance uptick: The midpoint of FY25 revenue guidance ($37.9 billion) was marginally up, mainly reflecting the Q3 beat. Recent small acquisitions will be included in Q4, partially offset by a deceleration in license revenue growth.
Margin gains: Adjusted operating margin improved to 33%, beating the 32% estimate. Cost control and efficiency measures continued to pay off.
Mixed segment growth: Mulesoft and Tableau saw steep deceleration in license revenue, primarily due to tough comps. Commerce Cloud faces competition from Shopify, highlighting segment challenges. Meanwhile, the Sales segment accelerated to 11% Y/Y.
2. Agentforce’s playbook
The word “agent” was mentioned 136 times during Salesforce’s latest earnings call.
That’s because Agentforce, Salesforce’s autonomous AI platform, is the company’s most critical leap into AI yet. Announced in September 2024 and launched in late October, Agentforce allows businesses to deploy autonomous AI agents for tasks like sales, marketing, and customer support. It’s a natural extension of Salesforce’s platform strategy but with new implications.
CEO Marc Benioff believes Agentforce is transforming the business. He describes it as part of a broader shift toward “agent-first companies,” where AI doesn’t just assist humans but fundamentally redefines how businesses operate.
What makes Agentforce different?
From automation to agency: Unlike traditional tools that rely on users for input, Agentforce leverages AI agents to proactively handle tasks and decisions, reducing friction and unlocking productivity.
Seamless integration: Agentforce builds on Salesforce’s foundational Data Cloud and Einstein AI. It connects seamlessly with Salesforce apps and federates data from external systems, ensuring the right data informs agents.
Immediate impact: Within a week of its launch, Agentforce secured over 200 deals with customers like FedEx, IBM, and RBC Wealth Management. The early momentum is undeniable.
Monetization: Agentforce has a usage-based structure at $2 per conversation. This consumption model is a critical difference compared to Copilot for M365, which is $30 per user per month. This approach means it may take longer to impact revenue as customers implement use cases, but the upside potential is more significant than a subscription service.
Benioff’s vision
Benioff sees Agentforce as the keystone of an “agentic layer” that all businesses will need to adopt. He highlighted industries like healthcare, where AI agents could manage everything from patient scheduling to follow-up care, and telecommunications, where agents could augment technical support teams.
Salesforce’s strategy contrasts sharply with competitors like Microsoft, whose Copilot AI tool Benioff dismisses as the "new Clippy." Instead of adding a superficial layer, Salesforce is embedding agents deep into its platform to ensure reliability, scalability, and secure collaboration between humans and AI.
Beyond the hype
Agentforce is more than a rebranding around recent AI trends. It’s delivering measurable results. For example, Wiley, a leading textbook company, used Agentforce to handle seasonal back-to-school surges without hiring additional staff, improving efficiency and customer satisfaction. Salesforce is already touting many more customer success stories across industries.
While the financial impact will be minimal in Q4, analysts expect a meaningful uplift in FY26 and FY27. Agentforce is driving a robust sales pipeline with clients like Accenture and IBM adopting AI-driven digital labor solutions.
3. Key quotes from the earnings call
CEO Marc Benioff
On the Agentforce opportunity:
“We've really created a whole new market, a new TAM, a TAM that is so much bigger and so much more exciting than the data management market, it's hard to get our head completely around.
This is the market for digital labor. And Salesforce has become right out of the gate here, the largest supplier of digital labor and this is just the beginning and it's all powered by these autonomous AI agents. […] These agents are not tools, they are becoming collaborators.”
In Benoff’s view, humans will be able to focus on strategic initiatives and building relationships while agents resolve issues, process transactions, analyze data, make decisions, and anticipate customer needs.
On the pipeline of new deals:
“Agentforce just became available on October 24th, and we're already seeing this incredible velocity, more than 200 Agentforce deals just in Q3. It doesn't mean anything because the pipeline is in the thousands for potential transactions that are coming up in future quarters.”
The last time I heard a software company CEO being this excited and confident about deal flow was Palantir’s Alex Karp when he saw the early velocity of AIP Bootcamps. We can’t quantify the potential revenue growth acceleration from Agentforce at this stage, but it could be material, even for a company the size of Salesforce.
On the impact of Agentforce on expenses:
“It's going to have dramatic implications for our company from not only the technology point of view, but also from a human resource point of view, where we can really start to look at how are we going to rebalance our headcount into areas that now are fully automated and two, into areas that are critical for us to grow like distribution.”
These efficiencies imply even more margin expansion in the quarters ahead and a rebalance of operating expenses toward sales & marketing.
“I think you've all heard that we're trying to hire 1,000, 2,000 more salespeople because we see not only maximized our productivity of our current Salesforce over the last couple of years, but we just need to grow and expand to reflect this incredible distribution opportunity.”
Salesforce is the “customer zero” for Agentforce. Management’s bullishness comes from the internal benefits they already see for the company. It’s very easy to sell a software solution that saves customers money, and they are ready to pounce. It shows that the company is all-in.
On Agentforce vs. AI chatbots:
“Agentforce is not just grounded in our Salesforce data and metadata, including the repository of 740,000 documents in 17 languages.
It's also grounded in each customer's data, their purchases, returns, that data, it's 200 to 300 petabytes of Salesforce data that we have that gives us this almost unfair advantage with Agentforce because our agents are going to be more accurate and the least hallucinogenic of any because they have access to this incredible capability.”
First-party data will favor the incumbents, and Salesforce is in a great position as the repository of customer data.
COO Brian Millham
On the critical role of partners:
“Our global partners were involved in 75% of our Q3 Agentforce deals in nine of our top 10 wins in the quarter. Over 80,000 system integrators have completed Agentforce training and hundreds of ISVs and technology partners are building and selling agents. And our partners are also becoming agent-first enterprises themselves.”
This newsletter regularly covers the importance of independent software vendors (ISVs) for an enterprise software business to thrive. It’s the ecosystem, stupid.
On growth momentum:
“In Q3, the number of wins greater than $1 million with AI more than tripled year-over-year and we signed more than 2,000 AI deals, including more than the 200 Agentforce wins.'“
Milham clarified that most Agentforce wins were in the Service Cloud, but he expects other categories to follow.
4. What to watch looking forward
Acquisitions
Salesforce recently completed its acquisition of Own for $1.9 billion and Zoomin for $344 million, reinforcing its Data Cloud capabilities. These smaller, strategic deals mark a shift from massive acquisitions like Slack ($28 billion) and Tableau ($16 billion) a few years ago. Both deals enhance Salesforce’s ability to leverage AI-driven insights, aligning with its focus on integrating AI into its core offerings.
Walking in Microsoft’s footsteps, Salesforce has been acquisitive, though it faces less regulatory scrutiny—a potential advantage in a landscape where big tech acquisitions are increasingly under the microscope.
Partnerships
Salesforce Ventures announced a new $500 million AI fund, doubling its commitment to $1 billion. These investments target high-profile AI startups like Anthropic, Mistral, and Cohere, supporting Salesforce’s efforts to remain at the forefront of enterprise AI.
By investing alongside big tech, Salesforce ensures that innovations at the cutting edge of AI—particularly those relevant to Agentforce—feed back into its ecosystem. Salesforce may not yet be a trillion-dollar company, but it behaves like one.
Executive turnover
This article would be incomplete without mentioning the sudden departure of Clara Shih, CEO of Salesforce AI and the driving force behind Agentforce’s launch at Dreamforce 2024. Shih, who had been in the top AI role since March 2023, left to set up a new Business AI group at Meta, aiming to build AI tools for businesses of all sizes.
Mark Zuckerberg’s focus on business agents, particularly leveraging WhatsApp’s ~3 billion daily active users, aligns well with Shih’s expertise.
With Agentforce already set in motion, maybe the timing was just right for her new challenge. Reflecting on her October interview with Yahoo Finance, her departure makes sense:
“I love to work on the forefront of disruption when it hasn't been figured out yet. I love taking ideas, products, companies from zero to one.”
While Shih’s departure highlights the intensity of the AI talent war, Salesforce’s leadership is no stranger to high-profile turnover. Marc Benioff has a well-known ability to groom executives in EVP and CEO roles, ensuring stability even when top leaders move on. This is where the depth of the “bench” comes into play.
As Agentforce becomes Salesforce’s most critical initiative, losing its “CEO of AI” so soon after launch could raise some eyebrows—but Wall Street remains unfazed.
The AI talent war will be a fascinating layer to watch in the coming years—and it won’t just involve big tech. Former Salesforce co-CEO Bret Taylor’s AI agent startup, Sierra, is already valued at $4.5 billion, showing that new competition can come from within.
As AI reshapes the competitive landscape, Salesforce’s ability to balance strategic acquisitions, forge powerful partnerships, and retain top talent will determine whether it can successfully ride the agent wave.
That’s it for today!
Stay healthy and invest on!
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Disclosure: I am long AMZN, CRM, META, and PLTR in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.