In a disappointing announcement for investors, Salesforce has revealed its revenue forecast for the third quarter is set to come in below Wall Street expectations, sending shares tumbling more than 4% in after-hours trading. This decline marks a troubling trajectory for the San Francisco-based business software giant, which has seen its stock lose over 24% of its value since the start of the year.

The current economic climate is taking its toll, as clients pull back on spending in the wake of ongoing macroeconomic and geopolitical uncertainties. As companies across the globe reassess their IT budgets, especially for enterprise cloud products, Salesforce feels the crunch.

In a bid to reassure investors, Salesforce also announced a significant $20 billion increase to its share buyback program, which now totals a whopping $50 billion. However, this move comes amidst growing pressure on cloud firms to demonstrate a return on substantial investments, particularly in artificial intelligence (AI).

AI Innovations Amid Job Cuts

CEO Marc Benioff recently indicated a strategic pivot, revealing that Salesforce has cut 4,000 jobs in customer support as a direct result of AI integration. AI now constitutes 30% to 50% of the company's workforce, drastically shifting operational dynamics.

Salesforce is further leaning into AI technology, offering AI agents that handle routine tasks without human intervention. The company boasts over 4,000 paid agreements for its innovative 'Agentforce' platform, which enables businesses to deploy AI-powered virtual representatives for functions such as recruiting and customer service.

Q3 Expectations vs. Analysts' Estimates

Looking ahead, Salesforce estimates third-quarter revenue to land between $10.24 billion and $10.29 billion. Unfortunately for the company, this forecast's midpoint trails behind analysts' average expectations, which hover around $10.29 billion.

Despite these ongoing challenges, Salesforce managed to surpass expectations in its second quarter, achieving $10.24 billion in revenue against anticipated earnings of $10.14 billion. However, as the company enters a turbulent economic landscape, investors and analysts alike will be watching closely to see how Salesforce navigates these unpredictable waters.