Salesforce, Inc. (CRM) Earnings Call Transcript & Summary

Good afternoon, everybody or still good morning. I guess, still good morning. Good morning again, everybody. Marc, good morning. Thank you. Our next guest, as you all know, is the CEO and Co-Founder of Salesforce, Marc Benioff. Marc founded Salesforce in 1999. We were just talking about how old we are and how old we're getting.

Too old.

Too old. It's an incredible Fortune 150 company with 70,000 employees. The largest enterprise applications company in the world. It's always great to have you back at this conference. We always appreciate you being here...

I only do it for you, man.

Well, thank you then. I'm glad...

Whoever the new guy is going to be, tell him, I'm not coming.

Okay. Well, then I'm going to hang around for a little while. I'll hang around for a little while...

If you're going to hand around, I'm going to hang around.

Okay. I hope so. You guys also just commemorated 20 years as a public company in July, correct? Absolutely.

It's 80 earnings calls. How do you like that?

80 earnings calls, that's a lot of earnings calls. Yes, I can't say 80 earnings calls. I think I can say 24 at this point. So I got a ways to go. I don't think I'll make it to 80, but we'll see. Yes. You're right about that.

All right. So let's dive right into it, Marc. You talked to a lot of CEOs worldwide. You've got a lot of customers. Broadly, what are CEOs saying about their appetite to spend this year or next? Just give us kind of a download on the environment based on what you see and hear with your business footprint?

Well, I think there's a couple of big things going on. And next week, we're going to have our Dreamforce conference here. So this place will be filled with Dreamforce. How many of you will come to Dreamforce next week? God, nobody. This isn't really my crowd. I'm leaving. Anyway, we'll have 50,000 people here in San Francisco. It's going to be awesome. It's sold out. And let me just -- I'll give you a little insight into kind of what's going to happen because I think that what has happened and what is about to happen is just extraordinary. And I guess about a decade ago, I had my first kind of super AI freak-out, and I really thought AI was just about to happen. I mean I grew up in the kind of the AI fantasy -- how many of you watched Minority Report, the movie, remember that? And what about WarGames, anybody remember that?

You got to be really old to remember that one.

Yes. These people are not movie people actually. It's interesting. How about The Terminator? Anybody? Her? What about her? No? Okay. Well, anyway, not a very interesting group, actually.

I watched all 4 of them.

What was that?

I watched all 4 of those movies.

Okay. I know you do. Yes, you and I are the same genre.

Yes.

And the guy who wrote part of Minority Report and WarGames is our futurist, Peter Schwartz. And so a decade ago, we're kind of go, "Oh, this AI thing it's going to happen, let's get going." And I kind of had this existential moment and I started buying a bunch of companies, and we built this incredible platform called Einstein. And it was doing this predictive intelligence, it did machine intelligence, machine learning, deep learning. And we started pioneering a lot of amazing things at Salesforce with AI. We started publishing models, we created prompt engineering, something we don't really get credit for, but the first prompt technology came out of our research team. And that's why you can see like we'll do a 1.5 trillion Einstein transactions this week. Those are predictive and generative transactions. Now still, though, it's not what I thought was going to happen. So I got a lot of value, like for example, when I do my calls, I do forecast calls every Monday, and we have our leaders from all over the world. I don't know if you do this. And then I will say, "Hey, Einstein, all right, we've had everybody lay this down, but what is really going to happen?" And that has been very good. And for the last few years, Einstein is by far our most accurate forecaster. And as you know, in running a business, this is actually really important, you want to know what the numbers are going to be, right? Are you with me on this?

Yes...

And the worse thing is, is when everybody is wrong. So that's been cool.

Which is most often by the way.

Yes. And we do that and then we apply that AI and that intelligence across all of our various customer touch points, so that can be, all the different pieces, like I just bought, okay, like these gorgeous shoes I'm wearing or the suit, whatever, they're both LVMH, and they're a huge customer of ours. They automate every one of their customer touch points. And if you go to Louis Vuitton, right down the street here, and you walk in and you give them your name, and I'm sure you're in the computer.

Well, certainly, my partner, [ Jan ] is.

And -- I don't need to have all those details. And then, we'll see like everything you've bought online, everything in the store, everyone in the call center, every e-mail you've done on and on, and you have a whole Customer 360 profile and you know this. This is our mantra. And 20 -- for the last 25 years, this has been the most important thing to us, automating every customer touch point. And that's what has really excited me. And when we look at the Louis Vuitton or like they have the brand that makes this suit that's called Berluti, it's awesome. And they really do like we've really accomplished our goal. It's really cool. And it has been an honor to build our customers, sales forces with them and their service forces; and their marketing forces, their commerce forces, even; their analytics forces, when we bought Tableau, which you guys use as well; and that's been very powerful; and even Slack. And as we build these forces for these customers. Now I think we are on the verge of building something truly extraordinary for them for the first time is going to be their Agentforce. And for each of our customers that we are starting to work with, this is a new concept. It's completely different and totally new. And maybe it hearkens back to these movies quite a bit. And I think that, unfortunately, in the last couple of years, and we've seen this, we've seen the statistics. We spent this $300 billion in AI collectively at this industry. But then there aren't that many great CEO stories about how they're getting value from artificial intelligence, like I even watch your interview you just did on CNBC. And it's hard to pull out a good story. The CEOs just don't have, "Oh, and we got this for the $300 billion." And I'm like just saying to myself, it's really interesting. And I think that there's been a few things that have gone on in the last couple of years that everybody needs to kind of get their head around, which is, it's cool to build your own model, okay, and train your own model and then retrain your own model and then train it again and retrain it again and then retrain it again. And when you talk to customers who are doing this, I think they're wasting a lot of money. And I have seen this over and over again. And I think that the second piece is that these copilots that have been sold, and there's a pretty good Gartner report that came out this week, into these enterprises that this is going to be their AI panacea also are highly ineffectual, leak data, which is not something you like in your business, I know. Have all kinds of trust and security issues and don't have the level of, let's just say, these are not the droids you're looking for, okay? So in my mind, that is what I'm thinking about.

Is the Agentforce is that droid we're looking for?

I'm going to get to it. Hold on to your breath. Don't give away the whole plot of the book, okay? So I think that there's one other piece, putting technology aside that since the pandemic, especially, and you and I have had these conversations and nauseam, workforces are actually quite overwhelmed. And there's a lot of low-value work that is being done. And for sure, employers definitely want that premise of AI. And if you want to know who that is, you all have got doctors that you work with or hospitals and so forth. And it doesn't matter what major medical organization that you work with or talk to or talk to your own, we work with them all. Doctors are super overwhelmed. They're burned out and nurses are burn out. Something happened in the post-pandemic that we all got a lot more anxious about our healthcare and we're like a lot more interactive with our doctors, like we'll get our labs and then we have to call our doctor, "Hey, what's this number? What's this? What's that?" So there is a magic part here that's going to be very exciting because there's no question that the vision that we all have for what the future can be is really just about to happen, and I believe it is happening. So next week, we will show our customers for the first time a platform called Agentforce. And why that is exciting is that they will be able to really see how humans with agents are going to drive customer success together. And this thought that you're going to work with an agent in your business is going to be an absolute reality for those clients. Today, that product already is with many customers, and I think that there's a lot of good examples. I'll give you a couple. But one is Wiley, we all know this textbook company, it's amazing. And Wiley is -- I wrote a couple of old little notes here so I -- to myself -- keep myself from being distracted. But Wiley has got 5,000 employees, and they are operating in 20 countries, there are in probably 10,000 schools, not a huge company. It's a mid-market company. But the thing about Wiley that's so interesting is right now is their Super Bowl. This is where everybody is buying textbooks. And what they usually have to do is surge their workforce, surge their sales force, surge their service force. In your business, it's not unusual to read a report from an analyst, great analysts like Kash, unseasonal. Well, it's a seasonal time, we're seasonal -- this is our seasonal workforce, not this year. Because they're using an Agentforce, they're one of our first customers, they are able to deploy an agent force the way that they will deploy a service force or a sales force. And the level of accuracy that we are seeing with our platform is remarkable. Now with the current generation of the models that are out there today, we have seen, like with our customers are trying and I'm going to kind of come back to the thought I made, "Hey, I built my own model" -- by the way, it's very fresh in my head because I've been on this Dreamforce focus group tour for the last 2 months. So I have met now with hundreds, maybe thousands of customers. And it's not uncommon. They're like -- here like I was just in Seattle, and I was with a large telecommunications company and they are, "Listen, we built our own model. We work with this model company down in San Francisco, we've got our own model, we're retraining the model, and we're resolving now 25% of all of our cases, it's very exciting." And I said, "Well, that's very cool for you. It's great. But why are you doing that? Why aren't you just using our platform?" Because the way our platform is put together with Agentforce, we are now resolving more than 90% of all customer service issues. It is the highest level of accuracy. Yesterday, I was in L.A. with Disney, who's using this to resolve complex issues not just with customers, but even with employees. And if you like work with any of the Disney cast members -- have anybody here been to Disneyland? Only a couple. Actually, it's a very boring group. Surprising. Don't watch movies, don't go to Disneyland.

I think they're shy.

Okay. Anyway, any of you ever hired the Disney guide, they help you get around the lines? Very poor people here, actually. So anyway, when you make some money...

Again, I think they're shy.

When you make some money, what you could do is hire these Disney guides, okay, and they get you around the lines and instead of getting through 10 rides a day, you can get through like 30, and it's really a cool product from Disney. And -- but it's very complex being a Disney guide. And if you're with Disney guides and you're in the Park, you'll notice that they've got Slack on their phone, which is our employee communication. They also have Salesforce on their phones. And it's kind of an amazing use case for them is -- and this is not uncommon, "Hey, I'm with Marc Benioff and we're heading towards Rise of the Resistance." This is a Star Wars ride. And this is really exciting and oh, the ride is broken. Oh, he's going to be so disappointed. So what I want to do is figure out where am I going to go now in the Park? Now Disney knows because we do now automate every touch point with Disney Store is on Salesforce, Disney+ is on Salesforce. We took that off of another vendor, actually. We've put all of the cruises, the real estate, the guides, every customer touch point and all the data is in Salesforce. So that opportunity, which is amazing, is to say, "Hey, I'm with Marc and ride is broken, and there's a lot of reasons why it breaks, but it's broken, it's very temperamental, right? And what am I going to do? What has he not been on? What does he like? Where will he" -- and the AI, boom, can read across the data set and now is delivering between 90% and 95% accuracy with almost no hallucinations because we have a platform approach, where we have been able to not just use a great model, not just use incredible, we call, it's a technical term, retrieval augmented generation, which is this kind of ability to, kind of, deliver very advanced query capabilities. But by putting a number of things together, we have delivered, through Disney's own benchmark, 2x the quality of Google's AI because of this platform approach. It's incredible. But you can imagine the value that we're bringing right at that moment to that Disney cast member in the Park. And that is the value of the agent, right there, to augment that employee. Now in some cases, you're going to get productivity like the seasonal workforce is you're extending the workforce, clearly. In some cases, you're going to augment the employee. There's no question. In our cases, you're going to increase the margin of the customer and the revenue. In fact, when I was talking with some of their executives, I won't go through the names. But let's say it was a super-hot day yesterday in L.A., which it was like 109 degrees. And they're like, "Oh, I don't know, if people are going to want to come out to a Park exactly and we might see a volume decrease on attendees," and it's really important for them because they have super high velocity into their parks. They've got 17 million visitors a year into the parks. So if they can kind of dial up the pricing a little bit based on certain variables, well, these agents just aren't kind of doing customer service thing, then they can go, "You know, that Marc Benioff guy, he is good for a good discount, so let's send a coupon to him saying, hey, we know you're in L.A. and you want to come to Disneyland tonight, we're going to give you a certain nighttime voucher and let's make this happen." And this idea for them to be able to action their employee base against a temporal idea of, like a temperature change to then increase volume and capacity, this is real. And it's not just the query, then when the customer is interacting, they are going to get a very high level of experience, much higher level than we've ever seen before. Now you can see how that could be incredibly important where you look at Disney+, where we had to replace another vendor who did not do as well, was not part of kind of our framework. And we're able to have a very complex conversation with that customer, able to do the upsell, cross-sell. You know they have a variety of bundles and this kind of thing and to be able to close that transaction across hundreds of millions of consumers. This just wasn't possible before, and that's why it's so exciting. And I'll tell you one more quick story, and then I'll -- and we can kind of go on because I'm kind of trying to set the stage, but I am so jacked about what's going on. Another customer I'm visiting down there is Kaiser. Now Kaiser, if you're not familiar with kind of our health plans here is a large healthcare company here in California. Guys, they are -- across the nation, I think, there are about 20 million patients. And it's -- this example that I gave is not an uncommon example. They are Epic's largest customer. I've gotten my labs. I have my labs and now, oh, I can see one of these numbers are not what they want to be. Who's had that experience, raise your hand? No? Lots of healthy people here. Anyway, good news in there. But what happens is, all of a sudden, you kind of are having a situation where you're in Epic, and it's like, this number is not right. I need to call my doctor. You ever had that experience? Everybody has that experience. And instead, you're able to work with this agent and the agent is going to say things, like, actually, we're just going to repeat the lab. We're going to schedule the MRI for you. Actually, we've contacted your doctor and we've scheduled the visit for you. And the agent is able to take action and reason and also then deliver the actual results. This is phenomenal. We have never seen this level of accuracy. And with Kaiser, we're seeing 90% to 95% accuracy in the model. And that's our next-gen model. So we have right now Atlas version 1 in -- with Wiley, for example, as version 1. And version 2 that's called Atlas, which is with -- right now with Disney, it's with Kaiser, it's with several other customers, delivering this phenomenal change. This is the droids that we're looking for. This is the vision that we want, where we want to be able to have much greater productivity, okay, much more efficiency and drive our top line with AI. We just are at this moment. And what I'm excited about for next week with Dreamforce. And yes, for those of you who'll come, we will turn this on for our customers in real-time. We're bringing 4,000 of our employees to San Francisco, to basically run what we call Launchpads with our customers, and we are going to turn on for thousands of our customers this capability for the first time. Now why that is exciting is, as I said, for the last 25 years, we have been tirelessly automating the customer touch points of hundreds of thousands of customers all over the world and this has been our passion. And for the last several years, what we've been doing is something incredibly important, which is building a Data Cloud, which allows us to amalgamate the data, so that we can deliver this accurate AI because you're not going to get the AI accuracy without the data and metadata. And the final piece is the agent. The agent then is going to provide that ability to connect with the customer in a whole new way. This is really I think the moment that I've been waiting for in enterprise software and to see it with these customers and to be with Disney, to be with Kaiser, to be with so many of these customers already who have this technology and now to show it to thousands of customers is what's really exciting me. And so what I've done is, I made a decision also to schedule -- we're very good at very large-scale events at Salesforce. We'll run these world tour -- how many of you have been to a Salesforce World Tour, anybody? Okay, they don't get out much. But anyway, but these events have about 10,000 -- 5,000 to 10,000 people each. And we're going to do 25 of them between Dreamforce and the end of our fiscal year. And the idea is that we want to put as many customers in and launch and get as many customers turned on to Agentforce and configure it for them and get going. Because up to this point, it's been a world just like bots. And we've all had that bot experience where we go to the bot and don't even want to deal with the bot because it kind of flails out. This is not that experience. This is a phenomenal experience that I think customers are going to have a transformational moment for their businesses.

So you laid out a lot there. If you...

I'm only starting, but thank you.

I think I'll get to ask one more question and you'll finish from there.

Yes. That's right.

But to take that, the implications of that as customers get onto the platform and they use it, how does it filter through to what happens in their business? How does it filter through into the terms of the size of their sales forces? How does it filter through in terms of the size of their marketing forces? You're obviously talking about things that make people more productive, but you're also talking about things that should create more efficiency, too. It's hard to change processes in business. How do you think about how this will impact your customer base as people adopt this? What will allow them to do strategically in terms of the way they operate?

You've got to think about this -- let's put it in your -- let's see if I can get you excited about your own business. One of the customers who has Atlas, which is the version 2 of Agentforce, it's currently in test, which is this platform approach for AI, not writing their own model, it is figuring it all out for you, okay? So RBC has been a customer of ours for many years. They're amazing. And Dave McKay is a fantastic CEO. Great. And they are a company, to give you a size, it's a pretty good-sized bank, right? It's not...

Big bank. Largest Canadian bank, big bank.

Largest Canadian bank, 17 million clients, right? And also, they have, in their call center maybe, I can't remember exactly, maybe it was 3,000 to 6,000 people. I think they've got 35,000 people on our Sales Cloud, selling mortgages and all their financial products. So how do we give them an Agentforce? How do we make those service professionals not having to deal with all of the really mundane work, while still preserving all of the regulatory environment that's mission-critical for the bank, all the KYC stuff that we're so good with that, that we have to do in our Financial Services Cloud. How do we sell more mortgages for them, which is one of their hot products right now? And especially as we start to move in a more favorable interest rate environment, the ability to go out and talk to all of these customers and have meaningful conversations. Now because these agents are operating across the flow of work and because we're able to read across the data, we're able to have an engineer complex relationships with the customer through the agent, looking at all aspects of their financial hierarchy, all the products that they have, all of the conversations they've already had with professional advisers and the whole institutional memory is already in Salesforce. The ability for the agent to have that complex conversation is possible and is happening. And I believe that, that is going to be a huge accelerator for companies that use these capabilities. Yes, there's going to be efficiency opportunities. But there is going to be revenue opportunities, like we have not seen.

More revenue and productivity with the same size.

Who would not want this kind of capability? Every -- you have a great sales force, don't you?

We do.

And you've got a great service organization, don't you? Because I know we've been on the phone when things have gone wrong. But you're going to have a great Agentforce also. And no one does yet and everyone will. And that is what is exciting for me. And I think other companies are coming to us now to help them build their agents because of the breakthrough that we've had in the technology because we've been doing this so long, we probably saw with Workday, we just did a relationship, we're building their agents for them for their Workday platform. This is really a moment in time. I think that I have never been as excited about the history -- historic moment, it's this moment that I think that we will remember as we're really about to enter a new world.

So what is Salesforce -- because of this, what does Salesforce look like 5 years ago -- 5 years from now, that's different? How does it evolve Salesforce?

Well, I think that where Salesforce is going in terms of when we look at 5 years from now, the ability to deliver that agent, your agent, for your business, for your industry, for your sales organization, for your service organization to build your own custom agent, for your own level of efficiency, inside your organization, that in the same way that in the last 25 years, we've built the company now we're giving guidance this year for about $38 billion in revenue. We've got about 75,000 people. I feel like we're a start-up. I feel like this is the beginning of Salesforce. We've automated all these customer touch points. That's been step one. You can't do this without the data and the metadata. So that is key that we have that. Two, we have to amalgamate the data. If you don't have the amalgamated data, you can't get to the accuracy on the AI. And the final piece is these agents. So what is the level of acceleration? What is the capability for all of our clients? All I know that for every single CEO that we talk to, every customer that we talk to, when we show them what is now possible, and it's not about that they have to go train a model or they do this kind of heavy lifting, the technical work, a lot of people have been running science experiments for the last 2 years in their businesses that they did not have to run. They did not achieve the efficiency that they wanted to achieve. They did not get to where they wanted to get to. You have to let enterprise software professionals and platforms evolve and mature to the point where we can deliver this capability. And I believe that we will inspire the next iteration of the whole industry. Everyone will have to fast-follow us into this. I think that in the case of what we've been able to invent in regards of the ability to kind of deliver these kind of extended RAG models and these next-generation capabilities for these clients, when they get these hands on it next week, I think that they will be astonished. And this is my big bet that I'm making in my own mind. I was going through this with we have a phenomenal engineering leader, he's a great person, has been in the industry a long time, he used to work at Microsoft and has been with us for a number of years and helped us architect quite a few things, great person. And we're also excited -- and I work obviously in a large team and an engineering team, and he came in and said, "This is so big and so huge, Marc, you should change the name of the company from Salesforce to Agentforce." And I said, "It's kind of a high-risk maneuver." And -- but his point was very, like, hit me really heavy where it's like, I do believe -- and I think everyone who's touched this technology believes this is that big. It's by far bigger than anything I've ever experienced. And when I talk to customers, like I'm sure even as you have fantasized in your own mind, it's going to impact every company. And our ability to deliver that immediately is going to be so exciting for us. And so that's what I'm super excited about.

Well, it's super exciting. It's a bold ambition and we're going to be excited to watch you make progress. And I'm sure that the Dreamforce next week will be awesome.

Really appreciate you having me. Thank you so much.

Good luck. I really appreciate you're doing it.

Look forward to seeing you. Thank you.

Thanks a lot, Marc. Thanks for being here.