The Six Five team discusses Salesforce Earnings and Trailblazer DX.
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Transcript:
Patrick Moorhead: Salesforce had their earnings and it was also a preview of the TrailblazerDX Conference. You know what? I’m going to let you hit the numbers. I think what I want to hit is the sermon that CEO Mark Benioff gave on the call. It truly was incredible. And listen, I’m not like a million view go viral, but I had 60,000 people, actually, I guess 80,000 people between LinkedIn and X come in and read this. But it was a sermon.
Daniel Newman: Benioff read it. I’m just saying.
Patrick Moorhead: I know Benioff liked it by the way, right after you. I’m pretty sure that you motivated Mark Benioff after you liked it, for him to like it. But a lot of his senior staff, his chief of staff, a lot of great… I must have said something of interest. And I don’t recommend, hey, you’ve got to go and look at this. But I would recommend going in and listening to this and reading the transcript. It was one of the things that really hit a sweet spot, Dan. What have you and I have been talking about forever about AI, is that you’ve got to get your data platform in order.
And what’s new about generative AI that’s different about machine learning, is you’re co-mingling data types more than ever. And true Salesforce spirit, they talk about the customer needs, and not just the customers, with what CEOs were looking through AI. And Dan, I’ve heard there’s a lot of alignment with which you’ve been saying on shows which is productivity, higher customer value. And that’s something that I hit on a lot. I call it stickiness.
And finally increasing margins, which really is a result of customer proximity and lowering costs. And it was good. But we went right after what he characterized as all amalgamated stolen public data sets without saying, how do you say OpenAI and Gemini from Google without saying Google and Gemini?
Daniel Newman: Just real quickly, there is a truth to it. There’s two sets. There’s the data that all these companies have used that they’ve taken every publicly piece of available data that they could scrape off the net, and they’ve used that as a training set. And then, there’s companies that are building things based on proprietary training sets. And who have we not from the very beginning said where the real value of this is going to lie?
Patrick Moorhead: Yeah, the real value is just what Mark said, right? And the only two models I’m aware of that actually cite their data sources or those from IBM and those from Salesforce. I had my AI model expert Paul dig into is this legit? But Salesforce actually has their own models. You want to bring your own model, you can bring your own model. You want to use the Salesforce model, you can do that too. It was good.
And even made a pretty funny comment about hallucinations are not a feature. And he talked about that airline’s chatbot story when the chatbot actually made up some offerings that didn’t exist. And the end user took him to court, and the airlines apparently had to actually pay what the chatbot offered. The company liability from-
Daniel Newman: Remember the free truck?
Patrick Moorhead: I remember the truck, I don’t remember the airline that he went through. He didn’t name names on this one. But it was pretty good. And then, he talks about the ecosystem. Essentially trapped data inside of Snowflake, Databricks, Microsoft, Amazon, Google. He said, put your hands up if you’re using Snowflake every day out there. It was just absolutely hilarious and true. And Dan, what did you and I say two weeks ago on the Cloudera stage? Which was essentially, we didn’t use the word trapped data.
But we said having data that’s spread across on-prem, colo, private cloud that’s on-prem somewhere, and public cloud and SaaS. And that’s trapped data and it’s trapped data gets back to the co-mingling of different types of data with GenAI. Hey, did I love this just because he’s affirming what you and I have been talking about all the time? I don’t know.
Daniel Newman: Well, you know, Pat, it’s not a topic without a victory lap.
Patrick Moorhead: Totally, totally.
Daniel Newman: It never makes sense.
Patrick Moorhead: Possibly my favorite, which is what he said about NVIDIA, he essentially characterized NVIDIA as being the Levi’s jeans of the gold rush and who’s the gold? It’s Salesforce. Then he said, “I love NVIDIA, by the way.”
Daniel Newman: Yeah.
Patrick Moorhead: So it was classic. Getting down to brass tacks here. Data Cloud is the punchline, right? Data Cloud is the data and metadata service that is, by the way, the fastest growing product ever in history. I didn’t get the stats on if that’s a percentage, dollar, what it is. 25% of fourth quarter deals over a million dollars had Data Cloud in it, 7 trillion records ingested in the fourth quarter. It’s a big deal. And again, you think of Salesforce as CRM, they’re going for it. They want Salesforce Data Cloud to be the data cloud for all of your data.
Now, what they could be doing better, which again, I don’t think they do a good job at, they don’t do a very good job explaining that Data Cloud is irrespective of where your data is. How do I get this on-prem? MuleSoft has a lot to do with this. There’s APIs. But I really think they need to go the extended the extra mile and do better talking about how you can leverage on-prem data. Because what is the biggest question that we get from enterprises, Dan? How do I activate my on-prem data in this generative AI world, right? Is it RAG? Is it something different? Is it some API? Is it metadata that I have to create on-prem that I ship to the cloud? It’s a big question.
The end of the sermon, Benioff said, “Hey, there’s nobody else out there that has anything like this. Text me or email and tell me what you think.” And let me read this. “Because if you see anyone else being able to deliver on the promise of enterprise AI at the level of quality and scale capable of Salesforce, I’ll be very surprised.” Anyways, check out TrailblazerDX. I’ve got my data analyst Robert Kramer attending and I’m looking forward to it.
Daniel Newman: Well, that was a sermon.
Patrick Moorhead: It was my sermon on the sermon.
Daniel Newman: I appreciate it very much. I maybe even cited him a few times in calls we had with some other CEOs. Because we talked to a lot of the CEOs of these companies this week that reported, and especially in the infrastructure side, and on some of the AI hardware side. And asking those questions. Pat, NVIDIA’s 80 to 85% of these AI project bombs. They’re controlling the entire margin and keeping all that margin.
And so these companies are talking about AI, but it’s like how well are they doing from selling AI servers? It’s clearly, we’ll get to Dell later, it can help when you report it correctly. But when you’re talking about operation and contribution margin, there’s a pretty large gold rush to be made on the inference side of things. And the inference is going to be done on the data that’s going to be coming out of the enterprise.
So we had a great conversation this week with the CFO of SAP. We’ve had some conversations with folks at Salesforce, a number of conversations with the leadership at ServiceNow. By the way, we’re going to have an announcement around that, something there pretty soon. And they’re building the software that is going to be enabling companies to be really profitable and productive and there’s a lot of profit in that path. The profit scale in software is huge.
And by the way NVIDIA gets this. Sometimes to Mark, like he doesn’t get, is I actually said a long time ago that NVIDIA’s valuation was trapped in its software, its systems, and its frameworks. And the hardware is just the thing that goes out the door. The biggest risk that they have besides margin contraction from competition is margin contraction from competition that builds frameworks and software that allows people to develop applications for AI that don’t require their really, really expensive hardware.
Patrick Moorhead: Are you thinking about more like ServiceNow?
Daniel Newman: Well, that was what I said. ServiceNow is a for instance. They’re certainly partnering with NVIDIA deeply. Everybody is. But there hasn’t really been an alternative. But Mark is on the right track with what he’s saying. But unfortunately, like my op-ed about NVIDIA, it’s going to depend more on how it ages than how it sounds right now. Because right now it’s provocative. Longer term though, the truth is if growth does contract and slow, and then dollars in AI starts to move to Salesforce, for instance, where the money that’s being made on the margin is, hey, we’ve added all this data cloud business and all this GD revenue, and our customers are spending 35% more on average.
They’re bringing in tons and tons of data into the data cloud, running all these applications expanding to use more of our application. So it goes back to the Copilot for finance. It’s an application of AI, but how does Microsoft make money? And we know that it’s $10 per, $35 per for Copilot. But when you have hundreds of millions of users, that can be a really, really attractive business model for these other software companies. That’s where it’s, hey, how quickly can they ramp revenue, add to margin, et cetera. Oh, by the way, they beat. They beat.
Patrick Moorhead: Yeah, I think the-
Daniel Newman: I’m not going to dive too much into the earnings. Because you know what, I think this was a way more interesting conversation that everybody can read. But they beat on the top, they beat on the bottom. I believe it was a muted guidance. It was a softer guidance. And I think that’s why the company didn’t get a huge boost from it. One of the things I said in one of my comments to the press was basically I expect a little bit of talk about the AI contribution to revenue.
It sounds like he got around it a little bit, Pat, I didn’t get to listen to the whole call, with his comment about the fastest growth. But again, my thing has been fastest growth is one thing. Fastest growth plus very specific like Azure added 3%, 6%. Dell, 40%. Order book, really specific numbers. I don’t think we quite got there yet, but it’s getting closer.
Patrick Moorhead: He didn’t. And they got got some really good questions on that. And that is a question. Like, wait a second Mark. If the AI is so great, why are you still in 10 x percent growth range? And I loved his answer. And it makes a lot of sense. What do we always say? You’ve got to get your data platform in order before you light these things up. And that’s exactly what I think his customers are doing, is getting your data lined up first, and then activating it
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
