Ann Berry (00:00):
Welcome back to After Earnings. I'm your host, Anne Barry, and today we have the pleasure of talking to Marc Benioff, co-founder and CEO of Salesforce. Salesforce just reported strong earnings off the back of the launch of Agent Force, the AI driven digital labor that's driving the next phase of growth for the company's customer relationship management software platform. We discussed the technology's potential Salesforce's track record of investing in AI startups and whether we'll see Marc Benioff in government one day. Let's get into it. So Mark, the force is strong with this. One is the kind of euphoric response you've had in that case from an analyst at Morgan Stanley in response to your earnings, which came out yesterday. You are executing against plan. You reported a hundred million dollars beat in revenue versus expectations forecast for fiscal year 2025 up modestly 10 basis point increase in margins as guidance in response, your share prices up just over 10% at the upper end. Your price targets are up at 4 25 compared to a share price of around 360 today. This is a really big vote of confidence and conviction building in what you're doing at Salesforce. So despite all of that at this point, what would shake your conviction in Salesforce's outlook?
Marc Benioff (01:13):
It's a good question. I mean, the confidence is with me. I've never been more confident. I've never been more excited and energized about Salesforce, but really about our whole industry and what's about to happen, this idea that we have a new horizon for work, that this is a whole new digital labor is incredible. For the last 25 years, I've been the CEO of Salesforce and we have 75,000 people. We'll do 38 billion in revenue this year. We talked about yesterday, 32.9% margins, 12.9 billion in cashflow. These are very good numbers for a company, but what I'm really excited about is this week I onboarded not only my human workforce but my digital workforce. I added a new capability called help.salesforce.com
(02:08)
And help.salesforce.com is agentic layer on my customer service and support environment built on our new product agent force. So if you go to that website, you can ask it all kinds of questions about how to get help with Salesforce, but if you're a Salesforce customer and you log in, it starts to ground itself, which means connect with our data and all of a sudden what happens is, and this is pretty magical, it knows a lot about you, the level of accuracy and has very low hallucinations and it can answer pretty much any question you need and you're not dealing with a human support agent anymore, you're dealing with a digital support agent. So I'm managing digital people, not just humans, and this is a pretty big breakthrough for the future of business. So all of our customers are watching this and that's why we're like, wow, this is going to be a huge growth opportunity as well.
Ann Berry (03:03):
Do you think we're in an AI bubble as knowing as much as you do about the intimacies of AI capabilities and you look at valuations both public and private right now, Marc Benioff, the investor, are we in an AI bubble?
Marc Benioff (03:17):
Well, I think that in certain areas you're seeing a bubble emerge in some of these kind of frontier models that are becoming commoditized very rapidly, and I wouldn't be surprised in the 2025 we start to talk about how these frontier models have crested become commodities, all offer the same level of functionality and are not evolving in the exponential fashion that we've seen in the last two years. So in that category, I would say yes, in the area where the AI has merged or moved into vertical solutions
(03:50)
Or unique solutions by industry or by key function or found a key niche or maybe since some of the emerging areas of robotics or some of the new robotic operating system companies, then I would say no, we're still at early stages, so we really have kind of two worlds. There's obviously companies with very significant revenue. That's great. And then I would say that there's companies that have really found a niche and that is critical for them. And then there's companies that have high valuations that just are not going to go forward, and that is why you saw in two very high profile examples, inflection, which was a very high valued startup kind of dissolve where the founder ended up at Microsoft, Mustafa Solomon. That was really something incredible. And the other one that we saw with Adept, which was David Luan, who was the leader of GPT-3 and started his own company ending up at Amazon, that some of these companies, there was no there and the very high valuations were not warranted.
(05:01)
That's going to be true in venture capital. Most of these companies don't work out. Salesforce is a very scaled provider of venture capital in a lot of these companies. We manage about $5 billion. We have a very high IRR with maybe the highest of all of the venture firms. We have tremendous access to every single deal. We've taken incredible deals, public like Snowflake where we met made I think $1.6 billion. These are moments where you do have to question what are the valuations and when they get away from the fundamentals, that's where you have issues. You see it in the public markets as well right now where you see certain stocks getting away from fundamentals. When that happens, everybody knows eventually they're going to correct to the fundamentals. So it's a right question to ask. And I think right now we all should be asking that same question.
Ann Berry (05:59):
Let's talk about some of these use cases. Mark, you've used the word magical. I saw that London Heathrow Airport, which I have just flown through, and it's complete chaos as always, is one of your,
Marc Benioff (06:09):
Isn't it great? It's fantastic. Very easy to get through there.
Ann Berry (06:12):
Well, it is now or it will be thanks to the way in which they're going to use Agent Force. So let's take that as an example. Tell us how Heathrow or another airport can be using Agent Force to change the experience of flyers like me.
Marc Benioff (06:23):
Well, I do think it's a great example and I'm so excited that Heathrow is one of our first customers using Agent Force. They were one of the reasons why we accelerated Agent Force and actually launched it at Dreamforce and released it to all customers on October 25th. It is the busiest airport in the world. It can be complex going from one place to another. We've all had those kind of situations where we're trying to transfer flights going from one country to another country, and you're going to be able to work with our agents and the agents are going to say, oh, we know you're on this plane and we know you're late and don't worry and we've arranged a special cart to get you over to this gate and everything's all right. What's that? You have a question about that? Oh yes, this is your answer and yes, we can help you.
(07:08)
Oh yeah, we can help you get through customs this way. And regardless of what your question is or the complexity or the difficulty, you're not dealing with just a bot. You're dealing with that guy behind me here, the hug, the Salesforce, we're dealing with Agent Force, the best AI in the world, the highest accuracy, the lowest to Hallucinogenics. You're going to get great answers and you're going to have a great experience, and he has never had those people to be able to provide that level of scaled capability for those millions and millions of people going through Heathrow. And now they do. And just as I now have an agentic layer on my company and I'm really excited about digital workers, Heathrow is also has an agentic layer and has digital workers as well.
Ann Berry (07:50):
You've made a couple of references Marc to Agent Force not being a hallucinatory agent. Talk to us about that, and I just can put this in context. You've taken a couple of shots lately at Microsoft's copilot even as recently as yesterday in an interview with Jim Kramer and you've called it inaccurate spelling data everywhere. You've compared it to Clippy, by the way, I thought Clippy was pretty fun. And actually now in retrospect, a little bit trippy to make reference to hallucinogens in your language. Talk to us about why you think Agent Force is so differentiated from copilot and other features out there.
Marc Benioff (08:26):
Well, we're delivering tremendous value today for our customers, and I think that for companies who have tried to use copilot, I've heard from so many, it's been a huge disappointment for them, and that disappointment really has really become a situation where for some customers it's even been a security risk. And computer world wrote a pretty powerful article about that. Gartner Rut wrote an incredible analysis of copilot telling customers to be careful of it. So that's where that comes from and I'm really contrasting that kind of first generation AI that Microsoft doesn't even use on their own website to what Salesforce is doing and how we run our own company with Agent Force. Our customers are using Agent Force, there's value from Agent Force. This is a big differentiation and very exciting for us.
Ann Berry (09:16):
Mark, you've talked about in your earnings Salesforce's plan to go and hire more humans to aid in accelerating the rollout of Agent Force At the same time Agent forces creating efficiency and presumably allowing you to remove headcount in other parts of your business. Talk to us a little bit about the puts and the takes where headcount comes out because efficiency gains where you actually invest in more people.
Marc Benioff (09:41):
Well, you're right. I mean this is an opportunity for CEOs like myself to think about how are we going to balance our workforce? What do we have humans doing? What do we have digital labor doing? What are our digital workers doing? What function goes where? How do we balance what tasks? And so as I've said, this is really a new horizon for business. This is a transformation of how we're running our enterprise and we didn't have this opportunity just a few months ago and now we do, and I think a lot of folks are still find it incredulous. That's why I think it's important that I turn this on for ourself or I've actually got two dogs sitting under my desk here, big golden retrievers and we have to eat our own dog food at Salesforce, and that's what we're doing, which is we need to show this is really an exciting transformation and we can all go there rapidly.
Ann Berry (10:35):
Agent Force 2.0 is due to launch very shortly on December 17th. What can we expect to see in that new version?
Marc Benioff (10:44):
Well, you're going to see a lot of new capabilities, but incredible levels of accuracy, incredible levels of performance and capability and the ability to tune that for each and every use case, and that will be a whole new version of Agent Force. Also, we're really seeing customers not just by Agent Force, but also by our sales cloud and our service cloud, our marketing cloud, our commerce analytics, slack, our platform with it, so we'll see a whole new generation of suites and bundling and pricing as well.
Ann Berry (11:17):
Mark, let's talk another potential application of Agent Force, and I want to refer to your X account. You Xed out recently. The future of Agent First governments is here. Bureaucratic growth has far outpaced frontline heroes like our military and vets and border agents. Up to 40% of budgets are consumed by compliance and politics. Now, AI agents like Agent Force can eliminate bureaucracy saving billions and reprioritizing people. Are we going to see government agencies using Agent Force in the near future?
Marc Benioff (11:53):
And we're already working with many governments and agencies, many here in the US especially that we run that they don't have the people. I mean, we just have not had an expansion of our workforce in the United States. I mean the workforce is stagnant and we need to find new ways to achieve this level of productivity and agents are going to be how we do it. So regardless of whether it's a military or a civilian agency, the opportunity to interact with citizens and provide that kind of service, whether you're recruiting employees into the government or interacting, collecting data, you're going to be able to do that with agents in incredible new ways and it's going to be much lower cost and much easier to use.
Ann Berry (12:33):
Are any government departments part of that first group of 200 that signed up to Agent Force over the last quarter?
Marc Benioff (12:39):
I cannot speak to the specific US government agencies that we're working with right now, but you can look online and you'll see we work with almost all of them and I expect all of them to have tremendous value and as they're ready to launch and to show what they're doing, I'm going to be the very first to get out there and show folks what's possible.
Ann Berry (13:00):
I'd love Marc to talk a little bit about tech and government more broadly. This is such a fascinating moment in time. We saw Meta CEO Mark Zuckerberg announced that he wants an active role in any dialogues that the upcoming Trump administration will have when it comes to tech policies. Have you been invited to Mor Largo to have a similar conversation with soon to be incoming President Trump?
Marc Benioff (13:22):
Well, I'm happy to support our country and our president in any way. Of course, I was an active participant of the George W. Bush administration where I chaired the President's IT advisory committee. We created many of the programs and legislation around computational sciences, healthcare, IT and cybersecurity. But since that, which was about 20 years ago, as I've been asked by different presidents to get involved, I'm happy to provide advice, provide support, but I have been cautious about joining anything new. It requires a level of commitment and involvement that I don't have since I, Salesforce is my primary and most important thing I do every single day.
Ann Berry (14:04):
Do you think that would change with Elon Musk doing what he's doing with Doge Mark?
Marc Benioff (14:10):
He has my full support and I think if he can help balance the US budget, I'm all for that. I think that should be a bipartisan issue and that we should all get behind that effort and having fiscal responsibility is incredibly, incredibly important for the future of our country.
Ann Berry (14:26):
So I have to ask, just hearing the passion that she talk about this, mark, are we going to see Marc Benioff running for or holding public office one day?
Marc Benioff (14:34):
I hope not.
Ann Berry (14:37):
Maybe we'll have one of your agents in your place.
Marc Benioff (14:40):
I really am very happy in my life. I love my life. I love being the CEO of Salesforce. I love what I do every day and when I did spend time in administration 20 years ago and I've worked with every president, I've realized presidents change and administrations change, but I don't change and I really enjoy my life, but I'm not a politician in any ways. I'm not really very good in the political environment.
Ann Berry (15:07):
Let's stick a little bit on the topic of Elon Musker around him. I think I've read Marc that you've said that you've regretted not buying X. Is that an accurate statement?
Marc Benioff (15:19):
No. No. I don't think I would've enjoyed it at all, especially with all the revelations that have come out about how the government was so involved in it. That's an area that I would not have enjoyed and if they were involved in my business in that way, I don't think I would enjoy that at all either.
Ann Berry (15:36):
You did buy Time Magazine though and a rumor to now be selling it. Can you talk to us a little bit about that chapter of your life?
Marc Benioff (15:45):
I really enjoy time. It's a lot of fun. We have our physical magazine, the digital magazine. We have these amazing events. I don't think you've been to any of them yet, but you're invited. We have incredible programs. We have incredible community. We even have a movie studio, coincidentally you probably saw Jared Isman was appointed today the head of NASA for the US government, and we did a whole documentary about him for Netflix from Time Studios called Inspiration Four, and if you haven't seen that, I'd recommend it. We did an awesome documentary on Kanye West called Genius. We even did one on Megan t Stallion. It's a lot of fun. It's a small company, of course, it's profitable, it's very creative. It's a very well-known brand. Everybody knows or probably grew up with time. We individuated it out of Meredith and it's been a great program and a lot of fun for me of, I don't want to make any clarity or lose clarity that Salesforce is the primary thing that I do each and every day. It's my main focus.
Ann Berry (16:48):
There is a connection there with the world of the news Marc and the way in which AI has been so disruptive to the positive and ways that you are capitalizing on its Salesforce, but also with some question marks around it. There is a lawsuit out there against open ai. The New York Times has sued focusing on copyright infringements, and you have talked publicly about how some of the models, some of the AI products that we're seeing out there have basically been built off the back of infringing copyright perhaps talk to us a little bit about your perspectives on that.
Marc Benioff (17:22):
Well, that's how models work. Models work because there's an algorithm and there's an amalgamated data set that the algorithm is trained on and tokenized on, and that's one reason that time actually signed an agreement with OpenAI because we found a lot of time content in their model. But what we found was there was a lot of stuff from time in that OpenAI brand and that we felt should be licensed by them, which they agreed to, and others have also had that licensing occur, and I think it's probably appropriate if they're training models on other people's intellectual property, those models should get compensated for the content that they are licensing.
Ann Berry (18:08):
You wrote recently in Time Magazine about how this is such a transformational moment for ai and you close your article Marc by saying that trust is going to be a North Star as we continue on this AI driven journey. When you look at things like that lawsuit, when you look at the controversy around data that's been used and perhaps privacy concerns, do you think that trust has already been eroded in the foundations of AI such that perhaps it can't be a North Star?
Marc Benioff (18:38):
Not yet. I think we're still at the very beginning of this journey. It's extremely important that we all get well-educated on it beyond just watching the movies. We all grew up on the movies, the Her and Minority Report and War Games and Terminator, and we need to get to a new understanding of what the AI is capable of now and what it could be capable of in the future. So thank you for reading my article in time. I felt it was very important that I write and publish that article and get that information into the public domain. There aren't enough articles being written on agents right now and what's possible, so we are at a threshold moment. This is the next generation of AI that is emerging. It's going to benefit incredible businesses like mine, and it also is going to have societal implications and we need to have a clear discussion to maintain trust as the North Star. Exactly as you said,
Ann Berry (19:36):
AI has become such an important area for investment, Marc that I think that you're seeing now in the market and probably going to pick up next year given just the change in the regulatory environment, this rush for acquisition, you can almost feel it now. Salesforce has historically been very acquisitive, tamp down for a little bit, and you've been focused internally, cost reductions being a key focus of yours as CEO. I feel like 2024 is the year that you just zipped back into public site with acquisition activity again at Salesforce. You bought Zoom in for about $450 million in September, owned for $1.9 billion, 10 x undisclosed amount, predict spring undisclosed spiff undisclosed. A question for you, I've interviewed a couple of senior executives now from tech companies, DocuSign being a case in point, and I specifically asked the CFO there, how important is valuation now when you think about the parameters by which you assess acquisitions of AI targets?
Marc Benioff (20:34):
Yes, you're right. We've done more than 60 acquisitions, large, medium and small this year. We also did air kit, which was how we were able to accelerate the release of Agent Force, and I think that innovation is so important to Salesforce. It's something that happens organically in our company. It also is something that happens inorganically and having that inorganic m and a motion is very important. Having it balanced with your organic cashflow is also very important. We're going to do 12.9 billion in cashflow this year as well. We're going to do 32.9% operating margins. We're going to do 38 billion in revenue and we're going to do all those acquisitions, including big acquisitions like own and others, so this all can work together. I think this is the most important thing and we're demonstrating that and we're innovating and we're delivering customer success and we are at the very top of our game right now and very excited about the future.
Ann Berry (21:36):
Does price matter to you, mark, when you're looking at how much to pay for some of these acquisitions, how big of a factor is it just versus just needing to have certain capabilities?
Marc Benioff (21:44):
It's very important, especially if it is going to get our investors' attention. I think when we did our Slack acquisition that was so large and so significant that it got everybody's attention that we're doing an acquisition not at 2 billion but 25 billion, and that has turned into an incredible company. They're on their way to 3 billion in revenue. It's amazing what is happening at Slack, the level of innovation, the ai, how it is becoming a home for AI and agents. The level of integration with Salesforce, I use it every single day. I'm sure you do as well. It's an awesome platform. It was going to trade once we had to buy it. We had no choice, but we have to take our investor sentiment in mind and we're very mindful of that and how we do acquisitions, whether they're small, medium or large.
Ann Berry (22:37):
Let's switch gears a little bit, mark, and talk about leadership, and you're not shy as a leader. You've had some real opinions. You're not shy about going out there. And one of those is on the topic of return to office RTO. There is now a mandate at Salesforce as of October 1st where you are asking certain teams to make sure that they are back in the office. Just talk to us about your thought process there and whether you think that to compete now to innovate, you do need people back doing in-person collaboration.
Marc Benioff (23:05):
Yeah. Employees that are not remote need to be in the office working if they're in the sales and marketing or customer functions or with customers, if they're remote workers and look, over 25 years, more than 25% of our workers have been classified as remote workers. They can work at home and they can work remote, but this idea that people who live a few blocks away from the office don't want to come into the office that we're trying to evolve and get them back in the office. They need to be onboarded. They need to be trained, they need to build community. They need to understand what's going on with some of the changes that are going on. They need to be with their customers, so we need to find a balance between those two things. Between being a remote worker or being a worker with who's with your customer or being a worker that's in the office, and I think we've really found the right balance and I think our workforce morale and employee happiness is very high right now.
Ann Berry (23:58):
You are such a key part of the culture of Salesforce. Mark, you're the founder, you're the CEO, your chair of the board. I'd love to just touch on succession planning. There's been a ton of focus on public companies and succession planning issues. I think about another founder who had those three seats, Steve Jobs at the Apex at Apple. How do you feel about succession planning for Salesforce? You love what you do, but you also do have a responsibility to make sure you've got a bench.
Marc Benioff (24:26):
Well, you have to think about it. I've been doing this 25 years. I look even at my mentor, Larry Ellison, who transformed his job when he was 70 years old to become the chairman and CTO. I look at a lot of different models. I look at all of our incredible executives inside of our company. All of our executives are required to have succession plans, including me. The board holds me accountable for that. It's a constant discussion with the board, and I think if you don't have that discussion happening and then there isn't plans in place, you are not governing your company correctly. It has to be a part of your governance plan. It's not something that's a random, optional discussion. It's something I take extremely seriously and it's part of how we operate the company.
Ann Berry (25:17):
Mark, you've said several times that your primary focus by long stretch is Salesforce. You've been super clear on that and I lured that. I know you've also had a lot of activists in Salesforce over time who I'm sure have also forced some focus. It's what they often do. As you look at your peer group, founder CEOs, many of them are wearing multiple hats. Elon Musk is one of them. They have a lot of outside interests. Do you think that there's going to be more of a forcing mechanism over time or more of these CEOs going to have to do what you've done, which is really focus more of their time on their one public seat?
Marc Benioff (25:51):
Well, you're right. I don't really serve on any other outside boards except for Salesforce Foundation. Obviously I own Time Magazine. This is my personal philanthropy. I'm working on building five hospitals, public hospitals, our Ocean Laboratory, the Trillion Trees Initiative. These are the major things that are of interest to me. I would say that it's of course a balancing act. It's not just wearing many hats, it's spinning many plates. But at the end of the day, the most important thing is if you're going to deliver a quarter like we delivered yesterday, you better make sure that you are focused on your company. I take my relationship with my shareholders or all of my stakeholders very seriously, and that's my primary goal. Nothing else happens without the success of Salesforce, so I'm very focused on their success.
Ann Berry (26:42):
Mark, I think you must see or have access to every exciting AI related startup. You certainly are in the rooms and have conversations with every AI policy making unit. I know you're part of the ble She Declaration, for example, that was signed by 28 countries. So you're in the thick of policy in Europe as well as in the us. You've a peer group of founders and public companies related to ai. As you look across that landscape, who do you look at? Who are the people you look at now and you say they get it. I admire what they're doing for our listeners, these are the individuals, the cast of characters you should be focused on as AI develops.
Marc Benioff (27:18):
Well, I think there's so many great people in our industry us to highlight one Fe Fe Lee who really led the AI computer science team at Stanford that all of these companies have come from. If you want to see the mother who has birthed all of these children, it is Fe FEI Lee. She is incredible. If you haven't read her book about how she sees all worlds, I would say that that is an incredible thing. She's just started a new company. I was given the ability to personally invest in and support her and help her husband is the head of our research at Salesforce and AI Sylvia, who's also professor at Stanford. I mean, these are incredible people. People who are doing incredible work in basic computer science, who are moving us all down the field and doing things that we never thought were possible before. And you really have to look at just a couple of exceptional people. She's definitely one of them.
Ann Berry (28:20):
Are we going to see a similar shakeout mark with data integrity as we see the applications of some of these models? And let me just put that in the context of Salesforce. You said earlier in this conversation that Agent Force has been built off internal Salesforce data, so you have direct line of sight to the genesis, the origin and the integrity, the quality of the data that your own products are built on. That's not true of a lot of other products that are being built at the moment that are reliant on third party data. Are we going to see a shakeout over time those that are succeeding based on high quality versus not?
Marc Benioff (28:54):
You may, but I think what's unique about Salesforce and Agent Force and be able to deliver the success to our customers of an Agentic platform is that we have 230 petabytes of customer data in our platform that we're able to then connect into those agents, which is what gets them the accuracy and capability. So that is what's very exciting.
Ann Berry (29:15):
Thank you. Marc Benioff, thank you so much for joining. I'm Anne Berry. Thank you for tuning into After earnings, the show that brings you up close and personal with the executives behind the world's most interesting publicly traded companies. If you learn something today, don't forget to like, subscribe, and share with your friends.
