Salesforce (NYSE:CRM) reported strong second-quarter earnings and revenue on Tuesday, along with full-year guidance that exceeded analysts’ estimates, yet shares fell more than 6% in after-hours trading.
The cloud software giant posted Q2 earnings of $2.91 per share, surpassing the average analyst forecast of $2.78.
Revenue climbed to $10.2 billion from $8.6 billion in the prior year, slightly above the expected $10.14 billion.
Data Cloud and AI annual recurring revenue (ARR) grew approximately $200 million sequentially, representing a 120% increase year-over-year and reaching $1.2 billion across 6,000 paid deals. The quarter included 60 deals exceeding $1 million that combined both Data Cloud and AI offerings.
Looking ahead, Salesforce projected third-quarter revenue of $10.24 billion to $10.29 billion, with the midpoint falling just below the $10.29 billion consensus estimate, according to LSEG data. Adjusted EPS for Q3 is forecast at $2.84 to $2.86, with the midpoint in line with market expectations.
For the full fiscal year 2026, the company anticipates earnings of $11.33 to $11.37 per share, above the consensus of $11.29. Revenue guidance was raised at the lower end to $41.1 billion–$41.3 billion, matching the $41.2 billion expected by analysts. Salesforce also expects full-year free cash flow growth of 12%–13%, well above the consensus of 9.4%.
Stifel analysts noted that “Salesforce’s revenue guidance was roughly in line with expectations, with only the lower end of the full-year range raised.” They added that this weighed on the stock in extended trading, despite the improved outlook for fiscal 2026 free cash flow growth. The team highlighted that “Dreamforce will play more of a role in shaping the narrative around Salesforce than F2Q results.”
KeyBanc analysts commented that Salesforce’s quarterly performance exceeded expectations but was not “earth-shattering,” with full-year guidance only marginally higher. While scale performance is impressive, it is “not enough to reshape the narrative” amid wider investor concerns over SaaS. KeyBanc maintained its Overweight rating but lowered the price target to $400 from $440, reflecting current market conditions.
CEO Marc Benioff said the company concluded the first half of the year “with strong performance across revenue, margins and cash flow.”
President and COO Robin Washington added that Salesforce had achieved “its tenth consecutive quarter of operating margin expansion,” noting that it exceeded all financial targets in Q2.
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