Salesforce blames its Claude addiction for denting profit margin guidance

Salesforce was unable to improve its margin forecasts because of the dollars it is spending on Claude tokens, an investor conference heard last week.

As an example of how heavily the CRM giant is investing in its own AI capabilities to build products for customers, Mike Spencer, deputy CFO and head of finance Salesforce, told the Deutsche Bank Technology Conference last week that spending with Anthropic — the LLM-builder with which it has launched a new partnership — was sufficient to manage investor expectations in terms of margins.

In its results last week, Salesforce said its operating margin, according to accounting rules, would be 20.5 percent in its Q2 results (ending July 31), but its guidance for the full year is 20.1 percent.

Spencer said the drop comes because it was spending so much on Claude tokens.

“Roughly about six months ago we unleashed Claude in our R&D cycle.

It's part of the reason we didn't raise margin guidance on the year because we're covering some of the token spend that we've got going.

And the goal of that really was to, let's see what we could break.

Let's see what kind of advancement our R&D teams can make on accelerating the product road map.

Worst-case scenario, we would pull back.” But Salesforce is now focused on getting greater value for money from AI spending by reconsidering which models it uses for which jobs, in line with many customers, he said.

“We're going into refinement mode.

We're going into the zone of ‘prescription model choice for task at hand,’ and what that really means is you don't need to use the latest and greatest model for every single task you might want to do,” Spencer said.

He said for some tasks in software development or building the wider tech stack, the latest models might be necessary, but for “the large majority,” they were not.

“You're totally fine with the second or third generation model.

That also includes, by the way, optimization across different vendors.