Salesforce (CRM), the leading cloud software provider, reported its fiscal fourth-quarter earnings on Wednesday, which fell short of analysts' expectations, sparking a notable decline in their stock price during after-hours trading. The company recorded revenues of $9.99 billion for the quarter, reflecting an 8% increase year-over-year. Despite this, it barely missed the consensus estimate of $10.04 billion from analysts, leading to concerns about its performance.
With earnings per share (EPS) coming in at $1.75, compared to $1.74 from the previous year, Salesforce's results still missed market estimates. Analysts had anticipated the EPS to hit $2.61 per share. This underperformance triggered about a 5% drop in Salesforce's shares as investors reacted to the news.
For fiscal 2026, the outlook provided by Salesforce was equally concerning, projecting full-year revenue between $40.5 billion and $40.9 billion, which is below the average analyst estimate of $41.35 billion. Adjusted EPS guidance was also disappointing, set between $11.09 and $11.17, narrowly missing the expected $11.18. This forecast has sparked discussions surrounding the effectiveness of the company’s new strategies and its ability to navigate through economic uncertainties.
Salesforce had recently welcomed former Gilead Sciences CFO, Robin Washington, as its new chief operating and financial officer, effective from March 21, signifying potential changes within the organization as it gears up for future developments. The appointment came at a time when the company was under pressure to deliver on its promises, particularly with the expansion of artificial intelligence (AI) offerings.
Analysts noted substantial investments made by Salesforce to integrate AI technologies, including Agentforce—a platform aimed at increasing operational efficiency by automizing interactions. This move signifies Salesforce's commitment to staying competitive within the highly saturated enterprise software market, where players like Microsoft and Amazon have made substantial advancements.
Despite the long-term potential seen with AI integration, currently, Salesforce's plans may take time to show tangible returns. "Given how poor initial generative AI experiments were for many companies, they're not just writing blank checks until Salesforce shows them Agentforce actually works," stated Rebecca Wettemann, the CEO of industry analysis firm Valoir. Her comment highlights the cautious approach many enterprises are taking before committing to investments.
Salesforce’s current remaining performance obligations, known as CRPO, showed limited growth, rising just 9% to reach $30.2 billion, beneath initial expectations of $30.125 billion for the quarter. This metric tracks future revenue from existing contracts and reflects the customer's decision-making processes within the unstable economic climate.
The delay faced by the AI product rollout—and the broader technology sector—indicates overall uncertainty within the market. Salesforce's future outlook is pivotal, as industry watchers await reactions from clients and competitors alike. When comparing stock performance, Salesforce has seen decline percentages of about 2% on the stock market and 8% since the calendar year began, reflecting investor unease.
Salesforce's mixed financial results signal changes are necessary for future growth and profitability. Management has indicated it will closely monitor market conditions and adapt its strategies accordingly, which could include streamlining operations or enhancing product offerings.
While the tech giant has high aspirations for future growth, expectations hinge on successfully implementing AI offerings and fostering enterprise trust. An optimism among analysts is tempered with caution, reflecting on how swiftly the adoption of such innovations will materialize.
Despite the dips, Salesforce maintains the support of many analysts who view it as valuable stock. Currently, it holds a consensus Moderate Buy rating among 41 Wall Street analysts. This consensus indicates high interest and potential marked growth, as evidenced by the average price target set at $393.76, which implies over 28% upside from current levels. Nevertheless, these ratings are anticipated to shift post-earnings report as the market digests these results.
Overall, Salesforce's earnings reveal structural challenges as it aims to scale up revenue and invest heavily in advanced technologies like AI agents. The subsequent quarters will be significant as investors, analysts, and the broader market evaluate its ability to accelerate revenue growth and restore stock value.