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Salesforce (CRM +9%) is making a big move today despite reporting its first EPS miss in the past five years with its Q3 (Oct) results last night. The silver lining is that revenue grew 8.3% yr/yr to $9.44 bln, which was above expectations, reversing a miss we saw in Q2. Unfortunately, the Q4 (Jan) EPS guidance was also below expectations with in-line revenue guidance. Investors seem unbothered as they are focusing more on the successful rollout of CRM's new AI-powered chatbot platform, called Agentforce.

• CRM said that Q3 revenue growth was driven by resilience in its core clouds. Subscription and support revenue grew 9%, led by another quarter of double-digit growth in both Sales and Service clouds. This was driven by strong ARPU growth, but, as expected, this was partially offset by deceleration in its license revenue growth in MuleSoft and Tableau due to tough prior year comparisons.
• Americas revenue grew 6% in nominal and constant currency, EMEA grew 12% (+9% CC) and APAC grew 16% (+14% CC). CRM saw strong new business growth in LatAm, Canada and Australia, while the US and parts of EMEA remained constrained. From an industry perspective, health & life sciences, manufacturing & automotive and energy all performed well. Both retail and consumer goods were more measured. Its multi-cloud momentum continues with its top 25 deals averaging 5+ clouds.
• Current Remaining Performance Obligation (cRPO) is a metric that investors watch closely. It grew 10% yr/yr to $26.4 bln, which was above the +9% prior guidance. The outperformance was driven by early renewal favorability and strong new bookings. Of note, over the past couple of quarters, CRM has seen stabilization in its transactional businesses, most notably, create and close and SMB. CRM guided to Q4 cRPO growth of approx. 9%.
• As we predicted in our preview, much of the call was focused on the recent launch of Agentforce. The company was very bullish on the call. It delivered 200 deals with thousands more in the pipeline. CRM said it was not like anything it has seen before. The company said Agentforce represents this next evolution of Salesforce with AI agents working alongside humans in a digital workforce with unrivaled speed.
• CRM noted that Agentforce is not just grounded in Salesforce data and metadata, it's also grounded in each customer's data, their purchases, returns etc. CRM believes this 200-300 petabytes of Salesforce data gives it an almost unfair advantage. Agentforce can instantly reason over this vast amount of data, deliver precise personalized answers with citations in seconds, and Agentforce can seamlessly hand off to support engineers. This is not some fantasy land, future idea. This is a reality today. CRM contrasted this with other companies doing enterprise AI. CRM said Microsoft's Copilot is just repackaged ChatGPT in many ways.

Overall, it is clear that investors are not worried about the rare EPS miss and downside EPS guidance. We think they are focusing more on the upside revenue and cRPO. Also, we think investors are excited about the potential for Agentforce, which had a successful launch in Q3 with a lot more deals in the pipeline. Management describes Agentforce as the next evolution of Salesforce and it is getting people excited.