Eyes are on Salesforce to “reverse those challenging results from 1Q25,” according to a KeyBanc report.

Salesforce Data Cloud performance. Artificial intelligence investments. And a partnership with rival Workday.

These are some of the main subjects expected to come up Wednesday when Salesforce reveals its performance for the fiscal 2025 second quarter ended July 31.

The San Francisco-based customer relationship management (CRM) tools vendor has sought to portray itself as an early leader in the emerging AI market, with CEO and co-founder Marc Benioff preaching the importance of AI customers owning their data and trusting the AI vendor.

[RELATED: Salesforce AI Push Comes With Partner Program Investment, Says Channel Chief]

Salesforce Q2 Earnings

The vendor has about 12,000 partners worldwide, according to Salesforce.

In an August report by KeyBanc, the financial services firm said that eyes are on Salesforce to “reverse those challenging results from 1Q25 with revenue disappointing and the margin story not taking hold.”

As a result of Salesforce’s performance in the prior quarter, KeyBanc wants Salesforce to show improvement in small and midsize business (SMB) sales – an area solution providers tend to service.

“Growth remains the core focus for investors, and we maintain some fear that management will shift its focus to ‘investing for growth’ instead of a balanced mix of growth and margin improvement,” according to KeyBanc. “We did see some faint signs of this with operating margin missing in 1Q25, though no structural framework changes to call out quite yet.”

The KeyBanc report said that Salesforce executives have work to do showing “deal slippage improving pipeline coverage as indications the company can stabilize or accelerate growth and correct the sales headwinds.”

Here’s more of what to expect Wednesday when Salesforce reports its latest quarterly earnings.

Salesforce Cloud Products Performance

The KeyBanc August report said that conversations with Salesforce channel partners showed that the Data Cloud data unification platform offering “is garnering outsized attention from Salesforce, which is applying pressure on the channel to get Data Cloud proof-of-concepts across the finish line.”

“The Data Cloud does not sound like it is an easy sell at the moment and customers are finding it difficult to justify Salesforce as yet another ‘independent’ data repository when data warehouse and data lake providers have already made their pitch,” according to the firm’s report. “We’ll be listening to hear any updates on Data Cloud’s momentum, although we expect it to be only positive.”

A July report by KeyBanc shared concerns for Salesforce Marketing Cloud as well as competitor HubSpot Marketing Hub due to a survey by the firm resulting in a tie between marketing spend and infrastructure spend as “the #1 area CIOs are most commonly pulling back spend on as it relates to AI crowding at 54% of responses.”

“Cloud spend reductions or ‘optimization’ is fairly easy to understand with all the associated costs of cloud hosting, but we would have thought much of the marketing spend reductions was behind us,” according to the KeyBanc report. “Sales fared better as the area seeing the third least reductions in software spend, giving us some confidence in its ability to remain largely unchanged amid the current macro environment.”

Salesforce AI Performance

Analysts on Wednesday’s call will likely want to see signs that Salesforce’s investment in AI is paying off and whether the vendor has seen increased attention to its cloud offerings as a result of the AI gold rush, as reported by other vendors and solution providers.

Morgan Stanley’s July report on a survey of chief information officers showed that Salesforce ranked positively among expected “net share gainers” of incremental generative AI (GenAI) spend over the next year – coming in behind Amazon and Microsoft and ahead of ServiceNow and Cisco.

When surveyed about expected new software functionality spending over time, Salesforce ranked second after Microsoft enterprise software and ahead of Workday and Snowflake.

Morgan Stanley also said that Salesforce screened well for “highest weighted average growth expectations in 2024,” with “2024 growth expectations revised up +30 bps (to +3.3%) from our 4Q23 survey,” according to the firm.

“While a more muted demand backdrop pressured 1Q results at Salesforce, 2Q24 CIO Survey data reaffirms our conviction in the company’s ability to enable customers to prepare their data sets for a myriad of GenAI use cases,” according to Morgan Stanley.

Salesforce’s push into AI has included investment in its channel partner program. In June, Salesforce and Slalom – No. 27 on CRN’s 2024 Solution Provider 500 – revealed an expanded partnership where Slalom will co-develop products and services aimed at helping users implement data and AI use cases in Salesforce.

As part of the partnership, Slalom launched an AI Accelerator with Data Cloud with the goal of powering predictive and generative AI across Salesforce’s Einstein 1 platform.

With many vendors and solution providers looking to AI as a way to increase sales around cloud offerings, analysts on Wednesday’s call might seek more evidence of cloud growth in Salesforce’s performance.

Morgan Stanley’s CIO survey called Salesforce a “share gainer” as organizations shift more workloads to the cloud – behind Palo Alto Networks, Amazon and Microsoft but ahead of Cisco, NetApp and Hewlett Packard Enterprise (HPE).

PredictSpring, Product Updates

Salesforce executives will likely use Wednesday’s earnings call to tout advancements and innovations in its product portfolio, including the recently announced acquisition of cloud-based point-of-sale software vendor PredictSpring.

The PredictSpring acquisition is set to close in Salesforce’s third fiscal quarter, according to the CRM giant. The acquisition promises to bring Salesforce further into the physical retail store and boost Commerce and Service clouds abilities.

This month, Salesforce revealed the Einstein Sales Development Rep (SDR) Agent and Einstein Sales Coach Agent – fully autonomous AI sales agents set to become generally available in October.

Salesforce has also made generally available new capabilities in Slack’s Workflow Builder no-code automation tool, now allowing users to start automations from actions in third-party applications, build workflows with a new plug-and-play design, and access more than 50 new pre-built templates.

And this month Sales Cloud users gained access to Pulse for Salesforce, a purpose-built edition of Tableau Pulse that brings out-of-the-box metrics and AI-powered insights into the flow of work in Salesforce CRM

Snowflake Opportunity?

Although Snowflake CEO Sridhar Ramaswamy told analysts on his company’s latest earnings call this month that “there’s not really been any noticeable effect or delay in things like our ability to sign up customers or get existing customers to deploy new projects,” as a result of a recent cyberattack targeting Snowflake customers, it’s possible analysts will seek insight from Salesforce executives on competition against this data tools rival and others.

Ramaswamy told analysts on the call that “after multiple investigations by internal and external cybersecurity experts, we found no evidence that our platform was breached or compromised.”

The July report by Morgan Stanley featuring a CIO survey showed Snowflake performing well among vendor respondents who expect to see the largest gain of incremental share of IT budget as a result of shifting workloads to the cloud over the next three years – behind Amazon and Microsoft but ahead of ServiceNow, Google and HPE.

ServiceNow ranked No. 4 for largest expected gain of incremental share of GenAI spending in the next three years, behind Google, Amazon and Microsoft but ahead of Cisco, HPE and VMware.

For expected new software functionality spending over time, Salesforce ranked ahead of Snowflake and Workday, but falling behind Microsoft enterprise software.

Morgan Stanley also called Snowflake the only vendor in its sample that saw “growth expectations for 2024 were revised down relative to 4Q23’s reading, moderating -109 bps (to +2.9%) from 4Q23.”

“Snowflake remains one of the most heavily debated names in our coverage, with key debates around the company’s competitive positioning, including the pressures on revenue per query, longer-term impacts of iceberg tables, and relative positioning within the optimization cycle shaping recent investor discussion,” Morgan Stanley said in the report.

An August report by Bernstein highlighted the dangers for Snowflake from data federation offerings, calling out Salesforce Data Cloud, SAP Datasphere and Microsoft Fabric in particular.

A July report from KeyBanc, for example, said that a collaboration announced by Salesforce and CRM rival Workday to establish a common data foundation could spell trouble for Snowflake.

“We view the announcement as making Salesforce Data Cloud moderately more competitive to Snowflake, but not too material given the general move to open table formats,” according to KeyBanc.

A separate July report from KeyBanc report based on a quarterly survey of value-added resellers (VARs) showed Salesforce, with its Tableau analytics software, tied with Databricks and MongoDB as data and analytics vendors that exceeded expectations the most in the quarter.

The three vendors’ 14 percent share of responses ranked behind IBM and Google’s 29 percent share and the highest result of the survey – a 43 percent share held by Microsoft, Amazon Web Services and Snowflake.

Salesforce, Workday Partnership

Analysts may look for signs that Salesforce’s partnership deal with Workday is having positive effects for the CRM giant.

Salesforce and Workday plan to unify human resources (HR) and financial data from Workday with CRM data from Salesforce for AI-powered use cases.

A July report from KeyBanc said the partnership should be “a welcomed sign for the Data Cloud and a step toward having Data Cloud be seen as a vendor-neutral technology rather than CRM-specific infrastructure.”

The partnership includes combining Salesforce’s Agentforce Platform and Einstein AI with the Workday platform and Workday AI for users to create and manage agents for onboarding, health benefit changes, career development and more, according to Salesforce.

As part of the partnership, Workday also enhances its existing integration with Slack for an improved conversational interface for users, according to Salesforce.