Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting Club
PRO
LivestreamMenuSalesforce came through in the clutch. The enterprise software giant on Wednesday delivered better-than-expected results for its fiscal second quarter and issued guidance for the current period that makes good on the company’s pledge to reaccelerate into the end of the year. The one-two punch not only validates the once-struggling stock’s recent resurgence. It is also sending shares up 12% in extended trading, reaching levels last seen in late January — before the market’s concerns about artificial intelligence displacing traditional software vendors reached a fever pitch and sent their stocks into a tailspin. If this wasn’t enough, Salesforce on Wednesday announced a new product integration with Claude chatbot maker Anthropic, the very startup whose rapid technological advances this year fanned much of those AI disruption fears. The tie-up should help some skeptical investors grow more confident that Salesforce — thanks to troves of proprietary customer data housed within its applications — has a role to play in this new AI world. Revenue in the three months ended in July totaled $11.35 billion, topping the LSEG consensus of $11.32 billion. On a year-over-year basis, revenue rose 9.9%. Adjusted earnings per share (EPS) came in at $5.90. The profit figure was driven by a massive paper gain in the company’s strategic investment portfolio, which includes a stake in Anthropic. As a result, it’s not immediately comparable to the Wall Street consensus. CRM YTD mountain Salesforce’s year-to-date stock performance. Bottom line Take a bow, Marc Benioff. The Salesforce co-founder and CEO has spent most of this year crusading against the “SaaSpocalypse,” trying to convince the market that generative AI was not a dire threat to the software-as-a-service business model, which has historically relied on seat-based licenses. At the same time, Benioff was also touting the company’s new Agentforce suite as central to its AI future. For much of the year, Benioff’s argument was in vain. At its late June lows, Salesforce’s stock was down more than 40% in 2026; its price-to-earnings ratio had shriveled to 11, down from roughly 20 at the start of the year, reflecting the market’s waning confidence in its future in a world where companies may shed headcount thanks to embracing AI tools, and where new applications can be generated with a couple prompts to an AI model. Salesforce and other software stocks have perked up over the past month, as sentiment around the group improved for a couple of reasons, including a Reuters report on take-private talks involving HR software provider Workday . Still, the AI disruption risk remained, as Intuit’s earnings report Tuesday night showed, with the TurboTax parent seeing pressure from cheaper AI-based alternatives. It’s a much better picture for Salesforce on Wednesday night, and our patience with the stock is being rewarded. In particular, we’re thrilled to see the third-quarter guidance show that management’s promise that revenue would accelerate in the second half of its fiscal year is on track. “This ‘SaaSpocalypse’ narrative has been such nonsense,” Benioff told Jim Cramer on “Mad Money.” “Skeptics said seats would decline, and Agentforce Sales and Service and Slack all grew seats year over year. Skeptics said customers are going to leave, and attrition is near its lowest level ever. … Contract length terms improved across all segments, new business and renewals.” Slack continues to be a bright spot in the results — a major reversal from a couple years ago, when the company was maligned for paying too much to acquire the workplace messaging app during the Covid-19 pandemic. While those criticisms might’ve had merit in the moment, they’ve expired. Slack saw some triple-digit bookings growth in the quarter, Benioff told Jim. Additionally, net new average order value (AOV) for Slack grew at its fastest quarterly rate since the acquisition closed in July 2021, according to CFO Robin Washington. “The numbers are just awesome, and it’s because every new company in AI is built on Slack,” Benioff told Jim. He added, “Nine out of the 10 top AI companies …. use Salesforce and Slack. Their spend [in the quarter represented] 435% year-over-year growth. Frontier models depend on CRM. They don’t replace it.” Annual recurring revenue (ARR) for Agentforce also continues to grow, reaching $1.5 billion in the quarter. That is up from $1.2 billion in the first quarter and $800 million in the fourth quarter of fiscal 2026. This sequential acceleration is an encouraging sign for the Agentforce product, which allows customers to build AI “agents” that operate within its applications and can autonomously perform tasks, such as resolving a customer service case or qualifying a sales lead. Combined with Data 360, the company’s cloud unit, ARR is nearly $3.9 billion, representing 210% year-over-year growth. Last quarter, the combined Agentforce and Data 360 ARR was $3.4 billion, with an annual growth rate exceeding 200%. This is one of the key performance indicators that analysts and investors alike are watching. It’s clearly going in the right direction, even if it’s still a small part of the company’s overall revenue base (it’s expected to do about $46 billion in full-year sales). Rome wasn’t built in a day. Another good sign for the future is Salesforce’s current remaining performance obligation (cRPO), which ended the quarter at $33.5 billion, up 14% year over year in constant currency. This metric measures contracted revenue expected to be realized over the next 12 months, so a mid-teens growth rate is bullish. It was 13% in constant currency last quarter. One of the debates around Salesforce that even predates this year’s “SaaSpocalypse” was slowing revenue growth into the single digits. The cRPO arrow is pointing higher, and hopefully that continues in future quarters. While it’s not in the numbers yet, there’s good reason to be excited about Salesforce’s partnership with Anthropic on the new “Claudeforce” product. Anthropic has seen incredible traction with enterprise customers, and there figures to be considerable overlap between the companies’ customer bases. The simple way to think about this product is a closer integration between Salesforce’s library of customers’ valuable data and the capabilities of the Claude model. “It’s one plus one equals three,” Anthropic CEO Dario Amodei told Jim on CNBC earlier Wednesday, before offering an in-depth example of Claudeforce in action. “My chief commercial officer was just demoing this for me with some of the internal stuff we do within Anthropic, just a half hour ago. He asked, ‘What are the biggest accounts that Anthropic is trying to close now? Like, give me a list of the biggest accounts. Talk me through the risks of each one.’ All the data, all the information, comes from being managed in Salesforce. But the conversation, the interaction, that comes through Claude. So, you can see how these two things can be more than the sum of their parts.” We hope to see and hear more about Claudeforce’s commercial strategy next month at Salesforce’s important annual Dreamforce conference in San Francisco. Salesforce has clearly hushed the skeptics on Wednesday night. Going forward, the company will need to continue executing and deliver a higher-for-longer revenue acceleration to truly silence the bears and prove AI is helping, not hurting, its business. For now, we’ll take this as a major win. We’re increasing our price target to $250 a share, while keeping our hold-equivalent 2 rating. Guidance Here’s a closer look at the third-quarter guidance that delivers on Salesforce’s second-half acceleration assurance: Revenue in the three months ended in October between $11.42 billion and $11.5 billion, which even at the low end of the range exceeds the LSEG consensus of $11.41 billion. Revenue growth in the range of 11% to 12% on a constant currency basis. At both ends of the range, the growth forecast is 1 percentage point above its July-quarter guidance, reflecting the promised second-half pickup. Current remaining performance obligation (cRPO) up 14% in constant currency, which is also 1 percentage point above the July quarter guide. Adjusted earnings per share (EPS) in the range of $3.42 to $3.44, above the LSEG consensus of $3.37. For the full year, Salesforce’s guidance was left unchanged on metrics such as adjusted operating margin (34.3%), free cash flow growth (roughly 4% to 5%), and capital expenditures as a percentage of revenue (about 1.5%). However, the company is now guiding to full-year constant-currency revenue growth of 11%, down from a previous range of 10% to 11%. It now also sees its subscription and support revenue growth slightly below 12% on a constant currency basis, up from approximately 11% previously. (Jim Cramer’s Charitable Trust is long CRM. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.Read More
About The Author
