Shares of Salesforce slid nearly 7% in premarket trading on Thursday after the cloud software provider issued a softer-than-expected third-quarter revenue forecast, raising fresh concerns about when its large investments in artificial intelligence will start to deliver financial returns.
The stock drop came despite stronger-than-expected second-quarter earnings and an expanded $20 billion share buyback program, underscoring investor unease over slowing growth.
Salesforce projected revenue between $10.24 billion and $10.29 billion for the third quarter, with the midpoint falling short of Wall Street expectations of $10.29 billion, according to data from LSEG.
The muted outlook suggested that businesses remain cautious with IT spending amid broader economic uncertainty, even as companies race to deploy AI tools.
“Overall, there’s a sense of frustration in the market,” said Melissa Otto, head of research at S&P Global Visible Alpha.
CRM stock falls despite earnings beat
For the quarter ended August 2, Salesforce posted revenue of $10.24 billion, up 10% from a year earlier and above analysts’ forecasts of $10.14 billion.
Subscription and support sales grew 11%. Net income rose to $1.89 billion, or $1.96 per share, from $1.43 billion, or $1.47 per share, a year earlier.
Adjusted earnings per share came in at $2.91, topping analyst estimates of $2.78, according to FactSet.
Salesforce reaffirmed full-year revenue guidance of $41.1 billion to $41.3 billion and forecast adjusted earnings per share between $11.33 and $11.37, broadly in line with expectations.
Agentforce adoption raises questions
The company has rapidly integrated AI into its cloud platforms, led by its flagship Agentforce assistant, launched in October 2024.
Salesforce said more than 12,500 Agentforce deals had been signed since launch, with about 6,000 converting to paid customers.
But some analysts noted that competition from AI-native applications and custom-built systems could limit Salesforce’s pricing power.
On an earnings call, Chief Operating and Financial Officer Robin Washington stressed the company was “doubling down on innovation” and remained confident in its ability to monetise AI over time.
“It is early days in the adoption cycle, but we are really confident in our strategy to monetise AI,” she said.
Buybacks and acquisitions in focus
Alongside its results, Salesforce raised its share buyback authorisation by $20 billion, bringing the total to $50 billion.
Chief Executive Marc Benioff signalled that the company would continue pursuing acquisitions to expand its product lineup and strengthen margins.
“If we see great entrepreneurs or great technology or something that just blows our mind, we’re going to buy it,” Benioff said.
In May, Salesforce acquired data management platform Informatica for about $8 billion, marking a return to large-scale dealmaking after a period of restraint.
Valuation and market reaction
Even after the selloff, Salesforce trades at about 21 times forward 12-month earnings, below Microsoft’s 31 times and Oracle’s 31 times, according to LSEG.
Some analysts said the valuation discount leaves room for upside if AI-driven growth accelerates.
“Second-quarter results and positive company commentary are sufficient at this juncture, considering CRM shares are trading near a historically low valuation level and deep discount to software peers,” JP Morgan analysts wrote, while lowering their price target to $365 from $380.
Still, with shares down roughly 24% so far this year, investors remain cautious.
As JP Morgan noted, “Growth has not inflected yet and investors are thus not seeing an imminent need to revise their thought process.”
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