Salesforce 2026 Q1 Earnings Strong Performance as Net Income Hits Record High

Salesforce (CRM), ranking 37th by market capitalization, reported its fiscal 2026 Q1 earnings on May 29th, 2025. The company beat expectations with total revenue reaching $9.83 billion, surpassing the $9.75 billion consensus. Salesforce raised its fiscal 2026 revenue guidance to $41 billion to $41.3 billion, reflecting positive market momentum. Strong growth in the AI and data cloud sector was highlighted, with annual recurring revenue surpassing $1 billion, a 120% increase year-over-year. Q2 revenue guidance also exceeded forecasts, ranging from $10.1 billion to $10.2 billion.

Revenue

Salesforce's total revenue for fiscal 2026 Q1 rose to $9.83 billion, marking a 7.6% increase from the previous year's $9.13 billion. The subscription and support segment contributed significantly, generating $9.30 billion, while professional services and other revenue amounted to $532 million. This robust growth underscores Salesforce's expanding market influence and strategic focus on key revenue-generating segments.

Earnings/Net Income

Salesforce's EPS increased by 1.9% to $1.61 in 2026 Q1, compared to $1.58 in 2025 Q1, reflecting continued earnings growth. The company's net income also strengthened, reaching $1.54 billion, up 0.5% from the previous year's $1.53 billion, setting a new record high for fiscal Q1 net income over the past two decades. This performance indicates a stable and positive earnings trajectory.

Salesforce's EPS showed modest improvement, indicating stable earnings growth consistent with the company's performance history.

Price Action

The stock price of Salesforce edged up 1.26% during the latest trading day, dropped 5.44% during the most recent full trading week, and edged up 0.48% month-to-date.

Post-Earnings Price Action Review

The strategy of purchasing Salesforce stock following a revenue miss and holding for 30 days resulted in a 38.38% return, significantly underperforming the benchmark return of 83.88%. This strategy exhibited a low Sharpe ratio of 0.18, indicating poor risk-adjusted returns. High risk and losses were evident, as reflected by a maximum drawdown of -56.74% and volatility of 37.70%. These statistics highlight the strategy's inherent riskiness, suggesting it may not be the most prudent approach for investors seeking stable returns. The analysis underscores the importance of evaluating risk factors and market conditions when implementing such trading strategies.

CEO Commentary

Marc Benioff, Chair, CEO and Co-Founder, expressed excitement about Salesforce's strong Q1 performance, noting an 8% year-over-year increase in revenue to $9.83 billion. He highlighted robust growth in small and medium businesses, with a particular focus on the importance of the Informatica acquisition, which aims to enhance their AI and data capabilities. Benioff emphasized a disciplined approach to maintaining margins while pursuing aggressive growth, particularly in the data cloud and Agentforce sectors. His outlook remains optimistic, underlining that this is a pivotal moment for the company, driven by the ongoing AI transformation and strong demand across various industries.

Guidance

Salesforce raised its fiscal year 2026 revenue guidance to between $41 billion and $41.3 billion, reflecting an increase of $400 million at the high end. The company anticipates approximately 8% to 9% year-over-year growth in nominal terms and reiterates its subscription and support revenue growth target of about 9% year-over-year in constant currency. In Q2, revenue is expected to range from $10.1 billion to $10.2 billion, with a current remaining performance obligation growth of 10% year-over-year in nominal terms, including a $300 million foreign exchange tailwind.

Additional News

Salesforce has announced a definitive agreement to acquire Informatica for approximately $8 billion, marking a significant move in its strategic expansion into data management and AI capabilities. This acquisition, expected to close in early fiscal year 2027, aims to enhance Salesforce's trusted data foundation, crucial for deploying powerful and responsible AI solutions. The transaction will be funded through a mix of cash and new debt, with Salesforce anticipating substantial cost synergies and revenue uplift. Additionally, Salesforce plans to invest in Informatica’s ecosystem, integrating its technology stack to strengthen Salesforce's platform. This acquisition underscores Salesforce's commitment to transforming its data management capabilities for a competitive edge.