Salesforce's Strong Quarter Masks Bigger Challenges Ahead

Salesforce's recent quarter has left investors impressed, but experts caution that the numbers may not be as strong as they seem. The company beat expectations, with revenue rising 11% to $11.3 billion and free cash flow jumping 81% to $1.1 billion. Adjusted earnings came in at $5.90 a share, far above the $3.27 analyst consensus.

However, a closer look reveals that the profit number was boosted by a $2.6 billion gain on strategic investments, including Salesforce's stake in Anthropic. Strip out this one-time gain, and adjusted earnings would have been closer to $3.37, only marginally ahead of expectations.

While the company's AI push has investors excited, the core business looks steady rather than spectacular. Claudeforce, a new partnership with Anthropic that brings Claude's AI into Salesforce's software, is live only for pilot customers and has yet to gain traction.