So Salesforce has now grown into the active granddad of SaaS. Maybe not growing quite as fast as it once did. But it’s matured into a true force of nature. Only Microsoft, Oracle and now Salesforce have crossed $40 Billion in enterprise software ARR:
- $40 Billion in ARR
- Growing 9%
- 33% Non-GAAP Operating Margins (19% GAAP)
- Generating $13B of free cash flow a year!!
Perhaps most importantly, Salesforce has leaned deeply into AI … and while the early usage is impressive, so far it hasn’t materially changed growth. So far:
- Since October, closed 5,000 Agentforce deals, including more than 3,000 paid just 90 days after officially launching
- Salesforce says Agentforce has managed 380,000 conversations, with only 2% escalated to humans and an 84% resolution rate
So far, at the public company level, it’s the infra players that are seeing the crazy AI growth. Nvidia, Google Cloud, Azure, etc. But how about 2026+? We’ll see. As Marc Benioff notes below, Salesforce’s just started. It’s only been selling AgentForce for a few months. He’s incredibly excited and bullish on where it’s going. It’s rejuvenated him. Maybe AI will for all of us.
Let’s dig in more
5 Interesting Learnings:
#1. Only 21% of Salesforce’s Revenue is from … Sales
This has been true for many years, but it often comes as a surprise to those that don’t know the company as well as they know its CRM.
#2. The Big Acquisitions Are Doing Well. Mulesoft, Slack and Tableau Still Growing Faster Than The Average
Salesforce’s big ecomm and marketing bets on ExactTarget ($2.5B) and Demandware ($2.8B) may have seen growth slow to 9%, but its huge bet on Slack ($27B), seemingly crazy expensive bet on Tableau ($17B) and sizeable bet on Mulesoft ($6B) all seem to still be paying off. Kudos:
#3. Salesforce May Be Hiring 1,000+ Reps To Sell AI, But Overall Sales & Marketing Spend is down
From 32% of revenue a year ago to 30% today. That’s a material drop.
#4. No Net Dilution From Employee Grants or Otherwise. -1% Dilution
Many faster growing public SaaS and Cloud companies aim for 2% a year dilution or less from employee grants, down from the 10%+ common at start-ups. Salesforce, using its ample free cash flow, has gone further using buybacks. It’s now at -1%!
#5. Professional Services Down to 5% of Revenue, Still Loses Money
Salesforce for many years has driven its partners to do the vast majority of pro services, and it’s a massive ecosystem. They still do some for their largest customers, and it’s down to about 5% of revenues. But they still lose money here.
And a few other interesting learnings:
#6. Partners were involved in 50% of our Agentforce wins and 70% of our Agentforce activations in Q4.”
If you only sell direct in SaaS and B2B, you lose so many opportunities. Another reminder.
#7. Closed 3 $10m+ Deals Last Quarter, and 25 Over $1m
Actually I would have thought it was even more enterprise than this. Still, a big focus on $1m+ deals at Salesforce.
#8. 76,000 Employees, So Abour $525,000 In Revenue Per Employee
Per efficient for SaaS, although not super efficient. Salesforce is still a sales & marketing driven engine. Still, driving this ratio up further will be key to continuing to increase profit margins.
#9. Not Adding Any Engineers This Year, But Growing Sales Org 10%-20%
What a contrast. Salesforce is seeing AI drive a 30% productivity in engineering, and “wants to drive that up.” But sales? They are growing it dramatically. As much as 20%, far faster than revenue growth.
#10. Salesforce’s Top Goal Now: To Be The #1 Provider of Digital Labor in the World
We’ll see. It seems unlikely they’ll be #1. And yet, I wouldn’t bet against Salesforce. They sell $40B+ of enterprise SaaS a year. They know how to … sell it.
#11. Salesforce Will Deliver $14 Billion+ of Free Cash Flow This Year, With 33%+ Non-GAAP Operating Margins
That’s how business software … is supposed to work ;). As Marc put it, “We’re generating far more cash than I ever thought we would” 🙂
$40 Billion ARR. Not too shabby! And while 9% growth isn’t crazy, think about the scale for a moment. It’s still adding almost $4B in net new bookings. A year.
Go beat that if you can.
