Salesforce (CRM) Stock: Drops 7% Despite Strong Q2 Earnings Beat. Here's Why

TLDR

Table of Contents

Salesforce (CRM) shares dropped 7% in premarket trading after providing weak third-quarter revenue guidance that fell short of analyst expectations
The company forecast Q3 revenue between $10.24-$10.29 billion, with the midpoint below the $10.29 billion analyst estimate
CEO Marc Benioff defended the outlook as “appropriately conservative” despite beating second-quarter earnings and revenue estimates
Salesforce announced a $20 billion increase to its share buyback program and acquired data management platform Informatica for $8 billion in May
The stock trades at 20.98 times forward earnings, cheaper than rivals Microsoft (31.26x) and Oracle (30.84x), with shares down 24% year-to-date

Salesforce shares tumbled 7% in premarket trading Thursday following the company’s cautious third-quarter revenue forecast. The drop came despite the cloud software provider beating second-quarter earnings and revenue expectations.

The San Francisco-based company reported second-quarter adjusted earnings per share of $2.91 on revenue of $10.24 billion. This represented a 10% year-over-year increase in revenue. Analysts had expected earnings of $2.78 per share and revenue of $10.14 billion.

However, investors focused on the company’s forward-looking guidance. Salesforce forecast third-quarter revenue between $10.24 billion and $10.29 billion. The midpoint of this range fell below the analyst consensus estimate of $10.29 billion.

Salesforce, $CRM, Q2-26. Results:
📊 Adj. EPS: $2.91 🟢
💰 Revenue: $10.24B 🟢
📈 Net Income: $1.89B
🔎 Record quarter driven by strength in AI and Data Cloud, with over 12,500 Agentforce deals closed and $20B added to the share repurchase program. pic.twitter.com/W1sbAO0sYY
— EarningsTime (@Earnings_Time) September 3, 2025

The company also provided GAAP earnings guidance of $1.60 to $1.62 per share for the third quarter. Analysts had been expecting $1.83 per share. The adjusted earnings forecast of $2.84 to $2.86 per share came in slightly above estimates.

CEO Marc Benioff addressed the market reaction during an interview with CNBC’s Jim Cramer. “Our results are absolutely fantastic and our guidance is also, you know, is always appropriately conservative,” Benioff said.

The weak forecast reflects broader challenges facing cloud companies despite heavy investments in artificial intelligence. Rising investor expectations for AI-driven returns are pressuring companies to show results from their billion-dollar technology investments.

Economic Uncertainty Weighs on Customer Spending

Economic uncertainty has forced customers to reduce their spending on cloud services. This trend has affected multiple companies in the sector as businesses become more cautious with their technology budgets.

Salesforce has been rapidly rolling out AI capabilities across its cloud services. In late 2024, the company commercially launched Agentforce, an AI agent platform designed to automate tasks and streamline operations.

The company expects these AI investments to help lift margins over time. However, the immediate returns have yet to materialize in the company’s financial results.

J.P. Morgan analysts noted the disconnect between expectations and current performance. “Growth has not inflected yet and investors are thus not seeing an imminent need to revise their thought process,” they said.

Strategic Moves and Valuation Metrics

Salesforce announced a $20 billion increase to its existing share buyback program. The move did little to offset investor concerns about the revenue forecast.

The company has shifted toward acquisitions after years of staying on the sidelines. In May, Salesforce acquired data management platform Informatica for approximately $8 billion.

These acquisitions aim to boost the company’s service offerings and improve profitability. The strategy represents a change from the company’s historically organic growth approach.

Salesforce shares have declined about 24% year-to-date through Wednesday’s close. The stock entered Thursday trading at $256.45, down from higher levels earlier in the year.

The company’s valuation metrics present a mixed picture. Salesforce trades at 20.98 times its 12-month forward earnings estimates. This compares to rivals Microsoft at 31.26 times and Oracle at 30.84 times forward earnings.

Some analysts see opportunity in the current valuation. J.P. Morgan described the shares as trading “near a historically low valuation level and deep discount to software peers.”

The analysts believe second-quarter results and positive company commentary provide sufficient support for the stock. They cited the cheap valuation as a potential catalyst for future growth.

Salesforce stock closed Wednesday at $256.45 before dropping to $238.30 in premarket trading Thursday.

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