00:00Let's start off with Salesforce. Overall, I mean, we're still talking about a company
00:03growing, maybe a little bit slower than what it was in the past. But everybody really wants to
00:08know what exactly this pivot to a Gentic AI and this 360 model and whether Mark Benioff can pull
00:15it off. What did we learn or what did you learn out of this report just now?
00:20Well, the two stories, Salesforce and Snowflake, couldn't be more different. And to your point,
00:25they do illustrate what's happening in software right now. So Salesforce expectations were very
00:30low. They're trading at 10 times cash flow. Nobody expected anything. And yet, especially in terms of
00:38their gains for the next quarter, that looks like to be a disappointment. And that means that that
00:44transition that you're talking about for moving into more AI centric and having that drive and
00:50acceleration in the business, that's just not happening yet. The company has talked about the
00:55fact that they expect to start accelerating in the back half of the year and going forward.
00:59They gave five-year guidance for double-digit growth. And yet, right now, it looks like they're
01:03going to grow more like 6%, 7%, 8% on an organic basis. Next quarter, that's going to require quite
01:10a bit of acceleration in the second half. So that transition to AI is taking a lot longer to being
01:17driven by AI is taking a lot longer based on these results.
01:21It seemed like one of the theories with regards to how Salesforce could sort of thread this needle
01:25on this AI disruption was the idea that it would kind of become like the Switzerland of AI,
01:30if you will. It would kind of offer everything under one umbrella. Do you see that as a potentially
01:36viable strategy? And more importantly, would it even be a unique strategy, given it seems like
01:40some other companies have the same idea?
01:43It is a viable strategy. And there are some companies that are in a position to do that.
01:48Microsoft, Salesforce, ServiceNow, these kinds of companies that are very much embedded and
01:54entrenched with their customers can come to those customers and say, look, you can have humans and
02:00agents work in one place that is where we are. To your point, a Switzerland, the place where agents and
02:07humans meet to interact and get tasks done, that is a viable strategy for a company that is so entrenched
02:14with its customers and its customers rely on it so much to operate. That vision makes sense. It's just
02:21hasn't shown up in results. And let's not forget, Salesforce got ahead of its skis a couple of years ago
02:26talking about how agent force is going to drive an acceleration. And we've now had two years of significant
02:32deceleration. So until they're able to deliver on the acceleration, the strategy is just that. It's a
02:39strategy. It's a vision. It's not translating to results quite yet. And I do want to quickly bring in
02:45HP. They're reporting results right now. They see third quarter adjusted EPS, 61 cents to 71 cents. The
02:52estimate had been for 64 cents. The full year look here, adjusted EPS between 290 to $3.10. They had
03:01seen $2.90 to $3.20. So narrowing that range a little bit, HP shares higher by about 12%
03:09or so
03:10after hours. But Gil, when it comes to Salesforce, there was an interesting note from Bank of America
03:16last week reinstating their coverage of the company. They have an underweight rating there.
03:21They expect structurally lower growth. And their phrasing was that they see Salesforce basically
03:26transforming from this historically high growth platform into more of a mature cash generator. And you
03:33mentioned, you know, that it's a deeply entrenched platform. But you think about the future and the
03:37ability to add new customers. I wonder whether or not you agree with that logic. Yeah, I would just say
03:44that
03:44it's fully reflected in the stock. Again, at 10 times cash flow, it's very well understood that Salesforce's
03:52days of driving significant growth are behind it. It is right now more in the mode of being able to
03:59possibly be a good cash generator, return cash to shareholders. They've significantly increased their
04:05buyback. That's the mode Salesforce is in. But again, that's why they're trading at 10 times cash flow.
04:10To believe they're going to go down below that is to believe that at some point the business declines
04:16and shrinks and is a melting ice cube, I don't think we're quite there yet. I think for now,
04:20we're just talking about slower growth. And as long as there's a good return of cash to shareholders,
04:26maybe some good M&A, good accretive M&A, the company can continue to do better than it's doing
04:32right now. And Gil, before we let you go, I do want to talk a little bit more about Snowflake,
04:37because now that after hours rally, we're talking about gains of more than 30 percent. Again,
04:43the big headline was that in addition to the earnings that they reported, that AWS has signed
04:49up Snowflake as its latest chips customer. We're talking about a six billion dollar deal. I mean,
04:55talk to us a little bit about how you're viewing that and whether or not this huge reaction
04:59that we're seeing after hours sort of matches the news itself.
05:05Snowflake is winning. Their expectations were very high. They're trading at 40 times cash flow,
05:10and they easily exceeded those. And in this deal with Amazon, they're entrenching themselves
05:16in the AI ecosystem. So they're making themselves more valuable in that ecosystem.
05:22What's happened this year is initially the year started with all software companies going down.
05:26And what's happened in the last few weeks is we're seeing a separation between winners and losers.
05:34Snowflake, Datadog, smaller companies like JFrog, they're winning. And then companies that are left
05:42behind, like Salesforce, unfortunately, are going to continue to linger down here. Big change,
05:49big dispersion of outcomes, big diversion in outcomes and a discrepancy in outcomes.
05:55And that's what's happening. Snowflake is winning. Their role in AI is getting bigger.
05:59And the deal with Amazon illustrates that.
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