Salesforce’s shares slide despite Q2 earnings beat
What’s happening:-
Shares of Salesforce fell in after-hours trading on Wednesday, following the release of the company’s second-quarter results.
What happened:-
The cloud software provider reported better-than-expected sales and earnings for the second quarter.
However, Salesforce issued weak revenue forecast for the current quarter, which exerted pressure on the stock.
Salesforce shares fall
How were the results:-
The San Francisco, California-based company reported low double-digit revenue growth for the second quarter of fiscal 2026.
Revenue rose 10% year-over-year to $10.24 billion, topping consensus estimates of $10.14 billion.
Adjusted earnings came in at $2.91 per share, beating Wall Street expectations of $2.78 per share.
Why it matters:-
The cloud software provider has significantly increased AI adoption since the launch of OpenAI’s ChatGPT in 2022. The endeavour culminated in the launch of Agentforce, an autonomous AI agent platform designed to automate a wide range of business tasks.
“These (second quarter) results reflect the success of our customers — like Pfizer, Marriott, and the U.S. Army — who are transforming into agentic enterprises, where humans and AI agents work side by side to reimagine workflows, accelerate productivity and deliver customer success,” CEO Marc Benioff said.
However, uncertainties in the macro environment resulted in customers cutting back their spending, which weighed on Salesforce’s growth. Salesforce’s 25% growth in the second quarter was underwhelming compared to Microsoft’s 45% SaaS growth and Oracle’s 43% AI cloud growth.
Although ARR (annual recurring revenue) generated by Salesforce’s AI initiatives, namely Data Cloud and Agentforce, grew 120% year-on-year during the quarter, they contributed less than 3% of total revenue. The slow monetisation of these initiatives, expected by 2027, exerted further pressure on the stock.
The company repurchased $2.2 billion worth of its stock in the latest quarter and announced a $20 billion boost to its current share buyback programme.
Management guided to revenue of $10.24-$10.29 billion for the fiscal third quarter, while projecting adjusted earnings of $2.84-$2.86 per share.
The company raised its revenue guidance to $41.1-$41.3 billion for fiscal 2026 and its adjusted earnings outlook to $11.33-$11.37 per share.
Salesforce stock
How shares responded:-
Salesforce’s shares fell 5.6% to $242.15 in the after-hours trading session on Wednesday, following the release of quarterly earnings. The stock has tumbled more than 22% year to date.
What to watch:-
Investors will continue monitoring the overall macro environment and competition from rivals Microsoft and Oracle.