On Wednesday, Salesforce Inc (CRM  ) posted its first quarterly revenue miss since 2006, along with providing a softer-than-expected guidance. Despite the miss, many analysts are optimistic that the cloud software vendor is yet to benefit from its use of generative artificial intelligence.

Fiscal First Quarter Highlights

For the quarter ended on April 30th, Salesforce reported revenue grew 11% to $9.13 billion, coming short of LSEG's consensus estimate of $9.17 billion. Net income impressively grew from last year's comparable quarter when it was merely $199 million, or 20 cents per share to $1.53 billion, or $1.56 per share. Adjusted earnings per share of $2.44 topped LSEG's estimate of $2.38 per share.

Second Quarter Guidance

Salesforce guided for adjusted earnings per share between $2.34 and $2.36 and revenue in the range between $9.2 billion and $9.25 billion, both short of LSEG's estimates of $2.40 per share and $9.37 billion, respectively.

Fiscal 2025 Year Guidance

While Salesforce maintained its sales forecast in the range between $37.7 billion and $38 billion, it lifted its adjusted earnings guidance from a prior range, $9.68 to $9.76, to now expecting them to be about $9.86 to $9.94 per share. CFO Amy Weaver warned of deal compression and slowing projects in the professional services segment.

AI Is The Elephant In The Room

During Salesforce's first quarter, Citi analysts evaluated that the broad challenges that have been dimming the macroeconomic environment for a while have now "returned with a vengeance". Goldman Sachs analysts find Salesforce to be "an under-appreciated generative AI winner" as they believe there is room for meaningful margin expansion. Morgan Stanley analysts were a bit more cautious about Salesforce''s growth, but believe the company will benefit from generative AI, particularly next year.

While the quarter was a disappointment and the weak forecast shook hopes of a near-term growth rebound, Salesforce CEO Marc Benioff remains confident that his company will be a big winner in the AI revolution. But AI has become a point of competitive concern with Microsoft Corporation (MSFT  ) and other tech titans marching confidently into the new era. Salesforce tried to catch up to Microsoft and others with its Einstein Copilot and its unique focus on enterprise customers.

While Microsoft and Google (GOOG  ) (GOOGL  ) try to serve consumers along with enterprises, Salesforce is going for the specific part of the market, companies, and this is where it is better positioned to thrive. Despite the scary threats of Microsoft, Google and others, there's still a lot of room in the AI arena, with a recent Bloomberg analysis estimating that the generative AI market is set to reach $1.3 trillion by 2032. That bodes well for Salesforce, as well as the fact that the existing AI tools, including those of titans like Microsoft and Google are flawed, leaving even more room to make its mark in the AI era.

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