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Fiscal 2025 will be the 'Year of the Data Cloud', says Salesforce CEO Benioff as he rails against lying AI models

Stuart Lauchlan Profile picture for user slauchlan February 29, 2024
Summary:
A strong end to fiscal 2024 for Salesforce. For fiscal 2025, there are some clear priorities ahead, according to CEO Marc Benioff.

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Salesforce’s latest quarterly earnings call turned into a powerful call to arms from CEO Marc Benioff around the dangers of enterprises not approaching the transformative potential of the generative AI revolution with care, with an emphatic statement that: 

Hallucinations are not a feature, OK?

Before diving into that, let’s get the financial business out of the way.  For Q4 fiscal 2024, Salesforce reported adjusted earnings per share of $2.29, up from $1.69 a year ago, on revenue of $9.29 billion, up 11% year-over-year. For the full fiscal 2024, adjusted earnings per share came in at $8.22, up from $5.24 last year, on revenue of $34.86 billion, up 11% year-on-year. 

Breaking the full year numbers down by cloud offerings, Sales Cloud revenue was up 19% year-on-year, Service Cloud 18%, Marketing and Commerce 21%, Integration and Analytics 16%, and Platform and Other 36%. Eight of the top ten deals during Q4 included six or more Salesforce clouds. Meanwhile deals over $10 million in value were up nearly 80% year-on-year for the full fiscal 2024 period. 

AI ahead

But as noted, for Benioff, the main talking point on the post results analyst call was AI, kicking off on a positive note: 

One, [CEOs] want more productivity and they're going to get that productivity through the fundamental augmentation of their employees through Artificial Intelligence. It's happening and it's empirical. Number two is they want higher value customer relationships, which is also going to happen through this AI, and they want higher margins, which we are seeing empirically as well when they use this Artificial Intelligence and these next generation products.

As we look at productivity, as we look at higher value customer relationships, as we look at higher margins, how do our customers get these things? How are they achieving these goals? It is AI. It is why every CEO and company knows they need to make major investments in AI right now. I believe this is the single most important moment in the history of the technology industry. It's giving companies an unprecedented level of intelligence that will allow them to connect with their customers in a whole new way.

But there are harsh realities that need to be addressed, he cautioned, things that go beyond AI’s “party tricks”: 

Let's talk about the truth. The truth is that these AI models are all trained on amalgamated public data. You all understand that…Now, some of my people even say this is just stolen data, but all this public data has been amalgamated into what they call training sets. And these training sets then get turned into what we call inference, which is how the AI then is able to start to deliver its insights. But there [are] other things that it's providing besides insights. These AI models, well, they could be considered very confident liars, producing misinformation, hallucinations. 

This is where my ears particularly pricked up as my mind went back to last year’s Dreamforce and a chat session with OpenAI’s founder and CEO Sam Altman where he made a not particularly convincing pitch that we should all regard hallucinations more as a value-creating feature of generative AI than as a bug. This was something I spoke to Benioff about later as it was a claim that sat uncomfortably with his own keynote only hours earlier where he had railed against hallucinations and highlighted the importance of trust in AI adoption. His wry response at the time was: 

I think he said that they're a feature, not a bug. I wrote that down so that I had it for my future responses.

Yesterday’s comment was more robust…

Trust 

Bringing the topic round to Salesforce’s core business for the past quarter of a century, Benioff went on to highlight the danger hallucinations can pose to enterprises and their relationships with their customers: 

These models don't know anything about the company's customer relationships, and in some cases are just making it up. Enterprises need to have the same capabilities that are captivating consumers, those amazing things, but they need to have it with trust and they need to have it with security, and it's not easy.

He cited the recent example of an airline chat bot that prompted a passenger to book a flight with a 90 day refund window, but that option did not in fact exist: 

So here's the chat bot, it hallucinates the option, it's working with the customers, [the option] didn't exist. It did not exist. The airline said, ‘Oh, listen, that was just the chat bot, it gets that way sometime. We're so sorry. You know what? That's just a separate technical entity, a separate legal entity, and [as] the airline, we're not going to be hold liability for that’.

Well, guess what? That defense did not work in a court of law. The court of law said that that AI chat bot, that made up that incredible new policy for that company, well, that company was going to be held responsible, liable for that policy, that they were going to be held liable for the work of that chat bot, just as they would for a human employee. They were being held liable for a digital employee.

He added later:

This company, which is a great company and a customer of ours, but did not use our technology, went out there and used some kind of rogue AI that they picked off the Internet. Some engineer just hobbled it, hooked it up, and then it started just spewing these hallucinations and falsehoods around their loyalty program, and the courts are holding them liable. Good! Let every CEO wake up and realize, we are on the verge of one of the greatest transformations in the history of technology, but trust must be our highest value.

Data, data, data 

For enterprises to deliver trusted AI experiences, three essential components are needed, advised Benioff: 

You need that compelling user interface, there’s no question, a natural and effortless experience…Number two, you need a world-class AI model. And now we know there's many, many models available. Just go to Hugging Face, which is a company that we're an investor in, or look at all the other models. 

The third component revolves around data and this is particularly crucial: 

In the enterprise, you need deep integration of data and metadata for the AI to understand and deliver the critical insights and intelligence that customers need across their business, across sales, service, marketing, commerce, whatever it is. That deep integration of the data and metadata, that's not so easy. That's not just some amalgamated stolen public data set in the enterprise, that deep integration of data and metadata. 

That’s what Salesforce does. We are a deep integration of data and metadata…Only Salesforce offers these critical layers of AI for our customers - the UI, the model and the deep integration of the data and the metadata - and makes the AI smart and intelligent and insightful and without the hallucinations and without all the other problems.

For Salesforce, that places huge emphasis on the strategic importance of its Data Cloud offering. This is currently approaching $400 million in ARR, growing at nearly 90% year-on-year. In Q4, 25% of deals greater than $1 million, included Data Cloud. Benioff noted: 

We've recently added over a thousand new customers to Data Cloud. We've never seen traction like this of a new product because you can just easily turn on the Data Cloud and it adds huge value to Sales Cloud, it adds huge value to Service Cloud, to Marketing Cloud, to the CDP [Customer Data Platform].

Or as he later put it: 

When you think AI, think Data Cloud

My take

Despite the hype cycle around generative AI showing no signs of diminishing and the demonstrable interest that enterprises clearly have for its potential, it’s going to be while before investment by the likes of Salesforce shows up on the bottom line. Chief Operating Officer Brian Millham thinks: 

We're going to start to see that show up further out in this fiscal year. We don't have a lot of it factored into our guide right now, to be candid, just because there's so much work that needs to happen now, the demand is heavy.

Meanwhile CFO Amy Weaver confirms: 

Some of the gen AI, it's still early, and given that the adoption curve at really our size and scale as a $38 billion company, we're not factoring in material contribution from these new products into our FY25 revenue guidance at this time.

While the investment in AI and getting customers ready and confident to tap into the benefits will continue - expect to hear a lot more on this out of next week’s TrailblazerDX developer conference - Benioff has a clear view on what priorities the coming year holds: 

Fiscal year '25 needs to be one thing - the 'Year of Data Cloud'.

That was the message hammered home at last week’s Salesforce corporate kick-off in Las Vegas, attended in person by 5000 execs - 80% sales - and 70,000 staffers online. The to-do list for fiscal 2025 has five items, said Benioff: 

Number one, Data Cloud. AI - become a great storyteller about these stories, number two. Number three, sell UE+ [Unlimited Edition+, the simplified package launched in December last year], sell Einstein 1 [platform offering]. Number four, deliver customer success. Number five, our incredible new Ohana 2.0 culture. These are the five things we're doing this year. 

Onwards to TrailblazerDX - Phil Wainewright will be on the ground there next week and reporting back. 

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