Salesforce (CRM) reported better-than-expected third-quarter earnings. The company reported adjusted earnings of $2.11 per share, well above the $2.06 estimate. Revenue of $8.72 billion just barely topped Wall Street expectations of $8.71 billion. Salesforce also issued fourth quarter adjusted earnings guidance of $2.25 to $2.26 per share, compared to an estimate of $2.17.

Essex Investment Management Co-CEO Nancy Prial says the company is showing progress on expanding its offerings and raising prices. Prial also notes Salesforce is at "the very beginnings of their entry into really using AI technology and using generative AI to allow their customers to really monetize and get a lot more value out of all of the data that's embedded in their CRM systems."

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Video Transcript

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JULIE HYMAN: Salesforce beating estimates on the top and bottom line. And the company also lifting its full year forecast. Here for a closer look at the latest Salesforce results, we've got Nancy Prial, Essex Investment Management co-CEO and senior portfolio manager. Nancy, thanks for being here. So for you, what is sort of fueling this latest phase of growth for Salesforce?

NANCY PRIAL: Well, we think it's a combination of, on the top line, continued progress with expanding their suite of customer relationship management products. They've also seen-- they've taken some price increases, which are coming through and helping out with revenue. And then we've got the very beginnings of their entry into really using AI technology and using generative AI to allow their customers to really monetize and get a lot more value out of all of the data that's embedded in their CRM systems.

So we think that is going to provide a pathway, not only for this kind of 10%, 11% topline growth, but potentially higher topline growth going forward.

JOSH LIPTON: And so Nancy, I think you're answering my question here, because the central question for investors, it seems here, to me, Nancy, was Mark Benioff going to be able to keep delivering that very strong double-digit top line growth, but also keep delivering, Nancy, these higher, let's call it, 30% margins. Are you confident that he can keep that momentum going, not just the Q4, but in the quarters ahead?

NANCY PRIAL: We are. We're particularly confident on the operating margin. As I'm sure you know, Salesforce for a company of their scale and, as I said, I think they're the third largest enterprise software company now, their margins really are not as high as many of their competitors. So there's still some low-hanging fruit, if you will, that they have integrating some of their previous acquisitions.

And we think the combination of Marc Benioff recognizing that this is what the market wants as well as having an activist presence on the board will allow them to keep moving these margins, not only maintaining them in this 30%, 31% range, but actually potentially moving them up into something more in the mid-30% range, combined with the ability to keep a good strong topline growth rate.