(Bloomberg) -- Salesforce Inc. is raising prices for for the first time in seven years after introducing artificial intelligence features.
Base prices will go up about 9% across major software product lines in August, the company said in a statement Tuesday. Shares were up about 3.9% in New York following the announcement.
Since its last price hike, “the company has delivered 22 new releases and thousands of new features — including recent generative AI innovations,” Salesforce said.
Many tech companies are trying to figure out how to profit from new generative AI features, which can be costly to offer due to the large computing resources required. In addition to the list price increases, Salesforce will charge extra fees for new generative features — last month it unveiled an AI “starter pack” that will cost $360,000 per year for 50 users.
Software has been getting more expensive this year across many providers, according to an April report from procurement startup Vendr Inc. Average contract value among Vendr’s customers was up 35% in the first quarter of 2023 compared to the prior year, signaling broad price increases, the company said.
The price increase indicates Salesforce may be having difficultly signing new customers, wrote Bloomberg Intelligence analyst Anurag Rana. Investors have been concerned about slowing sales growth at the software giant. Higher costs should “provide some cushion” to the company’s full-year revenue estimates, wrote Evercore ISI analyst Kirk Materne.
(Updates with analyst comments in sixth paragraph.)
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