Bill and Mike are here from Salesforce. Really appreciate you making the journey, especially after a big day yesterday, and maybe we'll start there. I know everyone wants to get your impression. You know, we had Carl, the CEO of Workday here yesterday, and it basically mirrored exactly everything you said last night on the call. You know, in back office, they were seeing deals pushed out, and no decisions, and didn't feel like it was competitive. So we've got a matching back office and a matching front office. What... I guess everyone's asking us this morning, like, what do you- what's going on? How do you, how do you parse this? I know the team gave a great explanation last night, but as you guys kind of reflect, some have said, "Is it rates?
Is it, is it the AI journey we're just investigating? We don't have all the money to spend on maybe some of these other things we want to do. We've got to reserve that right to put it into AI. How do you put the pieces together?
Yeah. Well, first off, thank you for having us. Like you said, it was a busy day yesterday, and, you know, as we went through the quarter, and as we went through sort of the last 90 days or so, it's been a very sort of turn, very quickly. You know, I think in Q4, we saw a lot of optimism around sort of the spending environment, the execution that we saw, the rigor in amongst our teams, really to start seeding this future around a data and AI for front office computing, as you're alluding to. And you know, I think in this quarter, what we saw is a little bit just more measured sort of calculation from our customers.
I spend a lot of time with customers, and, you know, their resolve, I mean, is they all know they need to invest, they all know they need to sort of transform, you know, front office with AI in the mindset. They're just learning how. And I think there's... That's creating a little bit of this flywheel of, of actually experimentation, this flywheel of, kind of doing the first, second, maybe third proof points before they get to real scale. And as you look at our business, specifically with Salesforce, there are incredible signs of optimism, from that activity. The growth of Data Cloud for us, you know, as a first wave of sort of the AI motion, is a real kind of sign of success here.
In consumer AI, you never really saw sort of this data movement, because the consumer LLMs largely took data that was in a public sense and sort of used it for training. Enterprises are very different. They need to kind of unearth this data, access this data, get this data ready for sort of this AI push, and, you know, that's kind of the sentiment that our customers are going through, is that preparation for this big bow wave of opportunity.
Yeah, maybe the thing I would add to it, just to put a little finer tooth on, a finer point on kind of the latter half of Q1, yes, we had some slipped deals. Yes, we saw some customers take no decision, as Brian talked about on the call yesterday. But I think importantly to understand is that, the buying signal is still there. It's not that deals are disappearing from the pipe. The pipeline is actually pretty healthy as we get into Q2. It really just is, you know, this dynamic where, for whatever reason, kind of everything felt like it broke away in Q1, as opposed to in Q4, everything broke our way. And so, you know, is it temporal? We hope so.
It's kind of what we're looking at, but it's not that customers are saying, "Hey, I'm done spending for the next two years." Like, we're not... That is not the conversation at all. I think that's super important to understand.
Did you observe anything different behavior through the quarter? Meaning, like, I know it's always can be back-e nd loaded in month three, but was there anything that you saw that maybe was different in the linearity, or...?
I think, I think the biggest thing that I see is, you know, customers are still sort of iterating and understanding their way through this world, trying to understand the overall, you know, kind of impact of not just sort of AI and front office, but how does this now impact their investments in just data, data platforms, you know, kind of investments with the hyperscalers and the ecosystem sort of around? And so I think there's a lot coming at our customers that they need to process, probably more so today than we even saw, you know, kind of two, three years ago, and so customers are just needing more advice.
And so back to your question, I think customers need more help on this journey, and that's kind of the role that we're gearing up to play, is helping them sort of take this technology and apply it to sort of the line of business impact that we're having.
Yeah, and in Q1 specifically, look, Q1 is always a little bit of an abnormal quarter for us because depending on how Q4 goes, you can end up having a slower start to the quarter, which is kind of what we had happen in February. Because we really did, you know, steamroll January, I think as most saw in our results. And then you have to build it through the quarter, and then when you back end-load the quarter, and if things don't break your way, you can kind of get end up in the result that we ended up in yesterday.
My question to Benioff on the call last quarter was about, "Hey, are you, are you... You know, you're saying you're seeing green shoots from Q3, but you weren't ready to break out." And then Millham, like, basically sounded like he had to kind of hold him back a bit, and he said, "Well, we're not really turned the corner yet." So I guess the question is just, everyone asks, you know, did the pipeline just get so depleted that maybe you didn't leave enough for Q1 because you had such a great Q4, and we're going through that pipeline rebuild, to your point. Is that-
Yeah, I mean, hindsight is 20/20, right? When we look back now on Q4, it's easy to look back and say, "Wow, we should have probably had more pipeline coming into Q1." We certainly, you know, if you want to use the word, drain the pipe, we certainly closed a large number of deals in the latter part of Q4. Felt like we entered Q1 with okay levels of pipe, but now hindsight 20/20, that clearly wasn't the case. And so we've kind of doubled back, I would say, over the past month, on ensuring that we are taking care of the blocking and tackling, taking care of the pipeline health, taking care of the ratios within the pipeline of, you know, pipeline opportunity to close ratios, things like that.
So, you know, the 180-degree comment is kind of funny. We were obviously talking a lot about that before the call yesterday, knowing Marc had said that, and kind of how we would help everyone understand where he was at. Again, Marc's comments tends to be CEO-to-CEO-level conversation, and that gets to what I mentioned earlier, where buying signals are still there. Customers are still committed to Salesforce, so this isn't a dynamic where a customer is saying, "Hey, I'm done, you know, cut me off." It's just more of a timing dynamic than anything.
I think just building on, you know, sort of the others, maybe more of the fundamentals in the business, seats continue to grow for us. I mean, there's been a lot of sort of, you know, kind of speculation about with AI, will there be a softness or slowdown in seats in, say, our Service Cloud or seats in, say, our Sales Cloud? No, actually, both those businesses continue to expand their seats. As Marc, you know, sort of mentioned yesterday, not only are they expanding seats in terms of quantity of seats, we're actually now really with our pricing and packaging reinvention looking at ways to sort of create more value per seat and really taking share from maybe some of the other adjacent markets that we have kind of core products to do with, with better packaging opportunity.
The third axis I think is really exciting is within this sort of new foundation of packaging, we're also seeing a lot of consumption revenue, which becomes a new flywheel that as, you know, kind of these seats get adopted and data gets adopted, and AI gets adopted, more linearity around sort of growth will occur because you'll actually just see this sort of flywheel of, of usage turn into sort of revenue. So as Mike mentioned, you know, Q4 for us was, you know, very much a locomotive. We actually did incredibly well in the execution, but now we're also sort of retooling for this next era with, you know, higher seats, higher utilization per seat, and then higher consumption that will also sort of fuel growth for the future.
There, Brian alluded to some, you know, maybe there are fine-tunes in the org structure rather than a massive overhaul, but I think a lot of questions we got are, what was the fine-tune? I think you had some Slack integration, you had a few other things, but can you just run through-
Yeah
... just what that change in the sales team looked like?
Yeah, with our thesis around sort of a more durable, sort of selling and go-to-market model, we've been doing some optimizations in our go-to-market structure, really optimizing for a key line of business buyers. Key buyers like the CIO office or the Chief Revenue Officer office or the Chief Marketing Officer office, really attached to our core clouds, that rather than having, you know, dedicated teams for every buyer, we actually have kind of clustered some teams together to really have higher efficiency, higher effectiveness in driving kind of more velocity there. So in Q1, this new buyer-led motion just got started.
And so I think as we've retooled some of the areas, it's created more productivity for what comes next, but it's also created a little bit of just, you know, getting out of the gate, as Mike said, a little bit of slowness, sort of getting kind of the rhythm started again.
Yeah, and maybe, maybe, a couple other examples and then, some data points. You mentioned Slack, so another good example is we collapsed our Slack sales team into our core sales motion. So instead of having, and I don't know the exact numbers, but 500 dedicated Slack sellers only focused on Slack, we now have all 10,000 of our account executives focused on the core bag plus selling Slack, and so we've actually expanded the sales motion. We have our normal kind of attrition and performance management dynamics happening, where anytime you have that, it's actually healthy for the org longer term, causes a little bit of disruption near term, but you're going to move AEs around as a result of that.
And so ironically, the funny thing about it, we brought it up yesterday because when reflecting on Q1, and we had a leadership team meeting a couple weeks ago, where our top 40 execs got together and we actually didn't talk about macro at all. The entire focus was on execution and what we need to do better. Talking about macro puts everyone into a victim mentality, and that's just not how we can operate. And so the real irony of the macro commentary and why we brought up go-to-market changes is that, we actually had less change this year, numerically speaking, than we did last year or the year before.
However, in this macro environment, the dynamic that we're trying to figure out is maybe even a smaller number of changes were more pronounced from an impact standpoint, just given what we're dealing with from a macro environment. So obviously, they're all very subjective, and so if you were to say, "Hey, Mike, what's the mix between the two?" We certainly think macro is a bigger impacting item, but it's hard to decipher exactly, you know, what each one contributed, if you will.
The European climate, I know Workday mentioned the same thing, and be a little soft in pockets of the US, LatAm little tight. So I guess just everyone's been asking me, is it consistently matching what they're saying in terms of the reason why things may be stalled out a bit? And I, again, I'll get beyond the quarter, I promise. I just think everyone here wants to hear, can I do a post-mortem? So...
I would say uniformly, globally speaking, the role of AI and sort of the rate of pace at which AI is impacting businesses is just as uncertain in EMEA as it is in AMER, or the Americas region. I think that different companies in different industries, you know, are seeing sort of the pace and sort of the rate of impact going faster than others. I think technology is a market that tends to move fastest, but because of sort of the sheer amount of technology that's in technology, there's a lot of sort of experimentation going on right now to really look at the longer-term effects that are there. We are seeing some good sort of utilization of you know, kind of AI specifically in places like financial services.
No, no surprise, they have incredible data about their customers, but they need to turn that data into sort of more outcome. And companies like Rocket Mortgage, you know, you mentioned Slack, which is a great example. Rocket Mortgage now is using Slack plus our core, you know, sales and service, plus our Marketing Cloud to really transform sort of their customer acquisition arm. And I think this is a big opportunity for Salesforce, you know, on what comes next. So much has been written about AI as a big productivity savings. I think that companies like Rocket are proving that AI can be a great growth opportunity, and that, you know, kind of moment where AI becomes a growth driver, I think is really where, you know, we're putting a lot of energy to help our customers get there.
The biggest question we get is AI, when's it gonna come to apps? 'Cause it's all in infrastructure right now. When does it come, in your opinion? Is it late 2024 into 2025? How would you characterize?
I think open the aperture just a little bit around AI in enterprise applications. We're already seeing it here today with the rise of our Data Cloud. Data Cloud is, again, sort of, like I said, we never experienced it in consumer 'cause you didn't really see the data world have to become ready for that. For enterprises, the shape and complexion of their data looks very, very different. And Data Cloud's growth is the first wave of opportunity for where we're seeing this AI materiality start to take shape.
I definitely think that is, you know, creating, an, you know, not just sort of, the rise of Data Cloud, but it's also creating growth opportunities for us to use things like our Einstein 1 Edition and our core products to actually raise the level of value that every user has in our offering as well. So I think it's here, to... I think it is starting to really have an impact, first with data, then you'll see it sort of roll through our Service Cloud, our Sales Cloud, et cetera.
You mentioned some pretty good
To be clear, not, not this calendar year. We think on the app layer that Bill's referring to, we think that's probably a next year dynamic, where we start to see it materialize. Data Cloud being the leading indicator is where we'll see it more near term.
You mentioned some good attach on Data Cloud. Can you just maybe expand on, on that goodness?
Yeah, I think. Well, first, it's always measured in customers. We added, like, 1,000 companies, you know, using Data Cloud, you know, this quarter, 250 petabytes of data now on the platform. It's sort of to give you a sense of how much materiality of data is sort of processing through it. And, you know, the more that we see this attaching to our sales and service base, it creates this sort of innovation opportunity to not just make those businesses dependent only on seat growth, but also now consumption sort of related to them. So I think it is been a big quarter of getting data mobilized. Just this week in Chicago, we have 5,000 of our technical specialists going through to sort of enable it right now.
This will become sort of a, a big, big opportunity for the next sets of quarters for how this wave sort of gets materialized.
You know the sales and service market well. Everyone asks, you know, you've been running at a really good clip for a long time, and there's always this question: Is there... What's left? Where, where, where do you see the opportunity? Can you, can you talk to why the two biggest clouds are still doing as well as they are?
Well, yeah, I think you... I think I get this question every conference I go to about, like, how do we maintain the growth rate at the size? You look no further than sort of our own lives as consumers and how much we're interacting with brands now as the biggest reasons why service continues to grow. You know, since the end of the pandemic, service volumes have gone up 25% every year just because, you know, companies have more endpoints that they can engage their customers with, of which, you know, we're kind of powering a lot of that for companies. So I think that, you know, from a growth posture for service for the future, it will continue to come as a result of just consumer sentiment of being able to access brands.
And so you'll see, as more sort of interaction volume goes, there's more of ability for us to automate those interactions. There's more of an ability for us to bring AI to those interactions, and there's really a higher efficiency bar that every organization wants to do within their sort of service teams, which gives us an opportunity to attach more products to the customers that we've already served. So on the basis of Service Cloud growth, I see sort of big horizons of opportunity ahead because just the sheer volume of interactions that are there. Sales is a little bit different.
Sales, from a sales market perspective, you're seeing a lot of sort of, especially in America, in North America, a lot of sort of micro vendors that have kind of different moments of specialization around sort of the seller, seller journey, seller efficiency markets, and you're gonna see some consolidation there. And in fact, you know, we know that, like, 92% of sales buyers today want to do some degree of consolidation around their, their sales technology stack, and they want to consolidate that with a, a more efficient, you know, kind of choice of, one vendor to, to power that.
That's ultimately, I think, one of the biggest opportunities we have in Sales Cloud is winning share from sort of these adjacent markets that we've maybe dabbled in, to now really go and continue to grow that market even further. So I think both of them have, like, great room to run. A little bit different growth stories for both. One will just come as a result of kind of more explosion of interaction volume. The other's gonna come at really from just, you know, kind of expanding into more TAM that surrounds our core.
The hypothetical question I keep getting, and you can defer or tackle it however you want, but if Google did get HubSpot, and that's been well discussed, but if this happened, everyone asks me, "Well, what does this mean to Salesforce in sales? What does this? How does this change the game?" So you can tackle it however you want. You can defer it, but I get the question a lot.
Yeah, well, I get this question a lot as well, not just from where I occupy, where I work today, but also where I've worked before at Microsoft, 'cause Microsoft also has a Dynamics asset in their CRM business, and, you know, just because Microsoft has a Dynamics asset, doesn't mean that they've really used that asset to command incredible market share. I'll tell you the reason why, that we see a stark contrast between Microsoft-
That's because you both left Microsoft. That's what happened. They took the two best guys out.
I don't know how to comment on that, but thank you. Look, I think one of the things that really makes Salesforce a special organization is our focus on customer success, our focus on being a trusted advisor to our customers and helping them invest and transform their line of business, not just their technology. That's a special formula that doesn't exist in other technology companies around the world. I think that, you know, with our focus around customer success, adoption, utilization of our technologies, being that advisor that sorta helps, you know, challenge companies to think different about how they engage their customers, it's not a technology problem that we end up helping companies solve, it's just our technology solves their problems.
And I think that's a big, you know, kinda difference between what maybe a Google and HubSpot will have to come to terms with, is it's not just technology, it's about really investing in your customers.
Can we go? Sorry, before we go to—can we go back just two questions? 'Cause I think it's super important. I wanna link together a couple of questions around AI, and then you'd asked about Service Cloud, Sales Cloud, et cetera, and I think it's super important to understand the dimension of how we're thinking about the future of—I'll use Service Cloud as an example here, and how we think about AI monetization. Because as you think about the timing of when customers are actually gonna go on to monetize an AI, there's a lot of dialogue happening right now around how that materializes, and Bill, talk a little about consumption.
And so for this audience, I think as you think about the journey we're gonna go on for Service Cloud, the product roadmap that we've got in front of us, we are super excited about on the ability to provide value to our customers. The real question that we're tackling, and Bill and I are connected at the hip on this right now, is really around how you monetize that value. And, you know, I've gotten the question a lot this morning, especially on the back of the results yesterday, around seat pressure and things like that. The important thing to understand as we evolve into AI, for some of our seat-based model, the atomic unit has to change and will change.
And so in a world where, in an extreme world, we're not seeing this right now, but in an extreme world, if you go all the way to the right end of the equation, and customers start, for example, riffing a bunch of customer service agents, they're still gonna have to have the software there to provide the value. And the question becomes: how do you monetize that value? In a perfect world, you'd say, "Hey, for every $1 a customer saves, we're gonna monetize $0.25 out of it." That's not a real equation you can actually execute on. And so then you go to the next layer and you say, "Okay, are we monetizing on transactions? Are we monetizing on a virtual agent?
Are you monetizing on some other derivative of how the customer is realizing the value?" I think I just wanted to go back to it 'cause I think it's a super important linkage as we think about the evolution of how we're gonna monetize the software, 'cause it will change. This is not a short-term journey. This isn't something that's gonna happen next quarter. But as you think about the next several years, that's why, that's why we're optimistic. I don't know if you'd add anything, Bill.
Well, I just would echo the same optimism, but more about being bullish about the opportunity. If Workday today, software really is another about 15% of, like, a company's costs.
Yeah.
And, you know, that means, you know, the rest of the software comes... or the rest of the costs come in the form of labor. If you imagine that labor gets replaced with software, it actually creates incredible op- you know, growth prospects for Salesforce moving forward. So I, I think it's not just optimism, I think there's a real bullish nature to how we can invest in helping companies, 'cause the, the true macro dynamics are companies, you know, continue to struggle with demand. They continue to struggle with hiring for that demand, and if software can ultimately, you know, become that, that sort of replacement of labor, I think there's a big opportunity for us in the future there.
Sorry to interrupt-
We got time for a question or two. I can repeat it if anyone has a question. I can keep asking.
I just wanna ask, I guess, just on the pipeline, like, how late did you see that? Frankly, Amy with Morgan Stanley, very positive, talking about, you know, never been prouder and foresight to get Salesforce. Both of those statements can be true, obviously, but I'm guessing she wouldn't have said that if she saw kind of pipeline deterioration. Just interested on those dynamics.
Yeah, I wouldn't say it was pipeline deterioration. That's not the word I would use. I would just say it differently in that when you look at things in retrospect and you say, "Hey, close rates weren't as high as we expected them to be," really, a different way of translating that is, you should have had more pipeline to start, 'cause then if you have the same percentage close rate, you actually would end up in a better place. And so it's really about volume, and the volume of your pipeline can be dependent on how much macro and pressure you think you're seeing on close rates, is kind of the way to think about it. And hence now, looking backwards, we're like: Man, we should've had more pipeline coming into the quarter. It's obvious now, right? But that's kinda where the dialogue is.
Maybe just to build on it, there's no change in sort of win-loss rates, you know, to against for, you know, any particular competitor. It was more, you know, sort of like, like Mike was saying, a little bit more measured in terms of what the transactions look like coming through, only because I think, you know, customers are still trying to pace themselves in terms of how much they're digesting on this now. But every customer, every customer is having these conversations with us. So that's why I think, you know, that's the demand is incredibly high. The pipeline, to Mike's point, you know, just needed to have a different math yield through it.
I think maybe we're all still struggling. Did you see it early in the quarter, mid, late, all late? How would-
I wouldn't say that we, in February, for example, and even the first half of March, first three quarters of March, that we felt like things were derailing. I mean, there was no, there was no really strong signal. I would say, in all honesty, and kind of we hinted at this yesterday, but as we got later in the quarter, especially the last few weeks, that's when things started to break away from us a little bit more... and hence we kind of end up where we were. All it takes is, you know, a small number of decent-sized deals to slip out and-
Yeah, that was another question. Were there elephants or just a bunch of antelopes this quarter?
Maybe a bunch of rhinos, maybe somewhere in between.
Not sure what animal-
Somewhere between that, I would say.
Maybe the only other thing I would say is, as we sort of alluded to, some of the retooling in our selling field maybe had some delayed impact of maybe not seeing it as early as we might have normally seen it, just because we are gearing up for that buyer-led optimized motion kind of in the second half.
Got time for another one?
Can you just talk about confidence for the rest of the year, and assumptions around close rates and that kind of stuff? Why you feel like
Yeah, I'll start, and maybe Mike, you can add in. But I think first off, like I said, every customer has questions about how to sort of, you know, utilize this technology in their business, and every customer's coming to talk to Salesforce about it. Our stance around trust and around the data, around making sure the data is in a sort of great state for using, that, you know, in their business, that is why our brand gets sort of utilized in these conversations. So the customer conversations are very much around, "You know, you're our partner to make this happen." That's giving us a lot of confidence around sort of the win rate or close rate or sort of competitiveness around kind of the products and services that we offer.
I would also say that, given some of the antelopes, rhinos, or elephants that we sort of saw in the quarter, there are a lot of deals out there. You know, and I think that's where... That's why I think, you know, our position is maintaining, you know, kind of our position for the year, because we have line of sight to what is out there, and conviction around our product strength to make that happen.
Yeah, and maybe to put a finer point on how you think about the trajectory through the rest of the year, and Amy talked a little about this in the call, but I'm not sure how well noticed it was. Of course, we have pressures on things like macro and professional services and FX, et cetera, but there are also some counterbalances to that. And so we've talked a lot about, for example, pricing and packaging. We've talked a lot about Data Cloud. Our industries continue to perform well. So there are some counterweights that are actually moving up and to the right, that are offsetting some of those headwinds. Hence, you know, we can come out and maintain guide. It doesn't do us any good to give a guide that we don't believe in. So let's be clear about that.
Really appreciate you making the journey. Everyone appreciates the, the time today. Thanks again for being,
Yeah. Thank you for having us.
Thanks everyone.
Thank you.