Morningstar

Salesforce Earnings: Data Cloud and AI Momentum Help Drive Good Results, With Guidance More In Line

We maintain our fair value estimate and rate Salesforce stock attractive.

A Salesforce sign outside building exterior.
Jeremy Moeller via Getty
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Salesforce Inc
(CRM)

Key Morningstar Metrics for Salesforce

What We Thought of Salesforce’s Earnings

Salesforce’s CRM fiscal second-quarter results topped the high end of guidance, with revenue growth of 9% in constant currency to $10.24 billion, while non-GAAP operating margin was 34.3%. Despite this strength, guidance was largely in line with the FactSet consensus.

Why it matters: Subscriptions were ahead of our model, while services were in line. Data cloud and artificial intelligence annual recurring revenue, or ARR, of $1.2 billion was up 120% year over year. For the second straight quarter, management was positive on strength in small business customers.

  • Data and AI products were in 60 deals greater than $1 million, with 40% of bookings from this business coming from expansions at existing clients. The firm has closed more than 12,500 Agentforce deals so far, about half of which are paid. Further, 80% of new Agentforce bookings are flex credits.
  • Multicloud deals continue to perform well, with 70% of the top 100 deals in the quarter including five or more clouds.

The bottom line: We keep our fair value estimate of $325 per share and see shares as attractive. While we are more concerned with the longer-term growth and profitability trajectory, our near-term estimates are a thin slice below broader Wall Street expectations.

Coming up: Salesforce raised the midpoint of revenue guidance for the full year by less than the quarterly upside. It expects a further $50 million boost from currency, which suggests the firm is more cautious about the fourth quarter. Third-quarter guidance was about as anticipated.

  • Guidance for fiscal 2026 includes sales of $41.1 billion to $41.3 billion, which raises the low end by $100 million, with non-GAAP operating margin now at 34.1%, up 10 basis points. Third-quarter guidance includes revenue of $10.24 billion to $10.29 billion and non-GAAP EPS of $2.84 to $2.86.
  • Management was bullish during the analyst call, noting acceleration in bookings and ARR, which suggests that guidance could be conservative.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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