Salesforce Earnings: Strong AI Growth, Weak Guidance – Can CRM Hold the Line at $287?

Salesforce reported its fiscal fourth-quarter earnings after the market closed, delivering mixed results that initially sent the stock lower in after-hours trading. The company exceeded analyst expectations on earnings per share, but revenue came in slightly below estimates, and disappointing guidance overshadowed the otherwise strong performance.

Salesforce posted adjusted earnings per share of $2.78, comfortably beating the $2.61 consensus estimate. Revenue for the quarter came in at $9.99 billion, up 7.6 percent year-over-year but slightly below Wall Street’s expectation of $10.04 billion. The company also reported strong free cash flow of $3.82 billion, exceeding estimates of $3.49 billion.

While the overall results were solid, investors focused on the company’s forward guidance, which came in below expectations. Salesforce forecasted first-quarter revenue between $9.71 billion and $9.76 billion, missing the $9.91 billion consensus estimate. Full-year fiscal 2026 revenue guidance of $40.5 billion to $40.9 billion also fell short of the $41.36 billion Wall Street estimate. The weaker-than-expected outlook drove shares down over 5 percent in extended trading.

Key Metrics and Performance Breakdown

Despite the revenue miss, Salesforce demonstrated strength across several key financial metrics:

- Subscription and support revenue reached $9.45 billion, up 8 percent year-over-year but slightly below the $9.52 billion estimate.

- Sales segment revenue grew 8.4 percent to $2.13 billion, missing the $2.17 billion forecast.

- Service revenue increased 7.8 percent to $2.33 billion, below the $2.37 billion estimate.

- Professional services and other revenue totaled $542 million, up 0.6 percent year-over-year and slightly above the $525.9 million estimate.

- Unearned revenue, which measures contracted revenue not yet recognized, was $20.74 billion, up 9.2 percent and slightly ahead of the $20.71 billion estimate.

- Remaining performance obligations, a key measure of future revenue visibility, came in at $63.4 billion, exceeding expectations.

While Salesforce’s top-line growth remains in single digits, the company continues to expand its profitability. Adjusted operating income rose 13 percent year-over-year to $3.3 billion, aligning with analyst estimates. The company’s adjusted operating margin improved to 33.1 percent from 31.4 percent a year ago, surpassing the 32.8 percent forecast.

Agentforce and AI Growth

Salesforce’s artificial intelligence initiative, Agentforce, has been a major focus for the company, positioning it to compete in the growing AI-powered automation space. The platform, launched in October 2023, is designed to automate tasks such as customer service interactions without human intervention.

The company reported that Agentforce has already signed up 3,000 paying customers, with major enterprises like Pfizer, Singapore Airlines, and Equinox among early adopters. Additionally, Salesforce’s Data Cloud and AI-related business segments reached $900 million in annual recurring revenue, more than doubling from a year ago.

While Salesforce expects Agentforce to contribute modestly to revenue in fiscal 2026, Chief Financial Officer Amy Weaver noted that its impact should become "more meaningful" the following year. Barclays analyst Raimo Lenschow acknowledged that while Salesforce’s revenue guidance disappointed, the AI data points provided by management were encouraging.

Despite the promise of AI-driven automation, Salesforce faces stiff competition from Microsoft and ServiceNow, which are aggressively expanding their own AI-powered solutions.

Why Did the Stock Sell Off?

The primary reason for Salesforce’s post-earnings sell-off was its weak revenue guidance for both the first quarter and fiscal 2026. Analysts were expecting stronger sales momentum, particularly as the company pushes AI adoption.

Guidance highlights:

- First-quarter revenue outlook of $9.71 billion to $9.76 billion fell short of the $9.91 billion consensus estimate.

- Full-year fiscal 2026 revenue forecast of $40.5 billion to $40.9 billion also missed the $41.36 billion expectation.

- Fiscal 2026 adjusted earnings per share guidance of $11.09 to $11.17 was just slightly below the $11.21 estimate.

Salesforce’s slowing revenue growth is part of a broader trend for the company. After growing annual sales by more than 20 percent for two decades, the company has now settled into high single-digit growth rates. This deceleration has made investors more sensitive to weaker-than-expected top-line forecasts.

Additionally, recent executive departures, including CFO Amy Weaver and COO Brian Millham, have introduced some uncertainty into the company’s leadership structure. Salesforce announced that longtime board member Robin Washington will take on the newly created role of chief financial and operations officer, but investors may need time to assess this transition.

Stock Technicals and Support Levels

Salesforce shares declined about 5.6 percent in after-hours trading, falling to the $296 range. The stock is now approaching a key technical level—the 200-day simple moving average at $287. This level is likely to act as a strong support zone, as it has historically provided a floor for the stock during pullbacks.

If Salesforce holds above the 200-day simple moving average, it may enter a period of consolidation before resuming an uptrend. However, a decisive break below $287 could open the door for further downside.

Key Takeaways

- Salesforce delivered better-than-expected earnings per share of $2.78 versus the $2.61 estimate but missed on revenue, reporting $9.99 billion compared to the $10.04 billion consensus.

- Bookings and remaining performance obligations were strong, indicating solid future revenue visibility, while free cash flow exceeded estimates at $3.82 billion.

- Agentforce AI adoption is accelerating, with 3,000 paying customers and $900 million in recurring revenue, but its financial impact will take time to materialize.

- Weaker-than-expected first-quarter and full-year revenue guidance weighed on investor sentiment, driving a post-earnings sell-off.

- The 200-day simple moving average at $287 is a critical support level to watch as the stock looks for stability.

Conclusion

Salesforce’s fourth-quarter earnings report was a mixed bag. The company demonstrated solid profitability, robust AI adoption, and strong remaining performance obligation figures, but revenue growth continues to slow, and guidance fell short of expectations.

While the AI opportunity remains compelling, investors are demanding stronger near-term results. The stock’s reaction suggests a period of consolidation, with support at $287 playing a crucial role in determining its next move.

Salesforce remains a dominant force in enterprise software, but as it transitions into a slower-growth, more profitable business, investor expectations are shifting. The company’s ability to execute on AI, stabilize executive leadership, and reaccelerate revenue growth will be key factors in determining its long-term trajectory.