Salesforce Inc (NYSE:CRM) Q2 Fiscal 2026 Earnings Beat Estimates Amid Cautious Market Outlook

Salesforce (NYSE:CRM) Q2 Fiscal 2026 Earnings: Revenue and EPS Beat Estimates, but Market Reacts Cautiously to Outlook

Recent Performance

Salesforce Inc (NYSE:CRM) reported its second-quarter fiscal 2026 earnings, showcasing a period of solid financial performance that exceeded analyst expectations. The company posted revenue of $10.24 billion, a 9.8% increase year-over-year, slightly above the consensus estimate of $10.24 billion. Non-GAAP earnings per share came in at $2.91, surpassing the estimated $2.81 by approximately 3.5%. Despite these beats, the stock experienced a decline of over 4% in after-hours trading, reflecting investor concerns over the company's forward guidance and competitive positioning in the rapidly evolving AI landscape.

The market's reaction appears to be driven more by future expectations than past performance. Over the past month, the stock had been relatively flat, gaining just 0.2%, while showing modest gains of 3.6% over the past two weeks. This suggests that investors were cautiously optimistic heading into earnings but found the outlook insufficient to maintain momentum.

Quarterly Results Analysis

Salesforce demonstrated strong execution in its core business segments. Subscription and support revenue reached $9.69 billion, up 11% year-over-year, while professional services revenue saw a slight decline. The company's current remaining performance obligation (cRPO), a key indicator of future revenue, grew 11% to $29.4 billion, indicating healthy demand pipeline.

Key performance metrics include:

• GAAP operating margin of 22.8%
• Non-GAAP operating margin of 34.3%
• $2.6 billion returned to shareholders through repurchases and dividends
• Data Cloud and AI annual recurring revenue surpassed $1.2 billion, growing 120% year-over-year

The company's AI initiatives, particularly Agentforce, showed significant traction with over 12,500 deals closed since launch, more than 6,000 of which are paid implementations. This suggests Salesforce is successfully monetizing its AI investments, though the market remains concerned about competition from pure-play AI companies.

Guidance and Outlook

For the third quarter of fiscal 2026, Salesforce provided revenue guidance of $10.24-$10.29 billion, representing approximately 8-9% year-over-year growth. This aligns closely with analyst estimates of $10.29 billion. Full-year revenue guidance was raised to $41.1-$41.3 billion, up from previous guidance and slightly above the analyst consensus of $41.21 billion.

The company also raised its full-year non-GAAP operating margin guidance to 34.1% and increased its operating cash flow growth guidance to 12-13% year-over-year. Non-GAAP EPS guidance for the full year was set at $11.33-$11.37, compared to analyst estimates of $11.35.

While this guidance demonstrates continued growth, the market appears to have expected more robust projections given the company's investments in AI and recent product innovations. The relatively conservative growth rates, particularly in the context of emerging AI competition, seem to be driving the negative after-hours reaction.

Market Context and Analyst Sentiment

Recent news headlines reflect the mixed sentiment surrounding Salesforce's results. While acknowledging the earnings beat, several outlets highlighted concerns about "weak sales outlook" and "lackluster sales growth" projections. This narrative appears to be weighing on investor confidence despite the solid quarterly performance.

The company's valuation remains premium compared to many software peers, which increases the pressure for strong growth projections. With the AI competitive landscape intensifying, investors seem to be questioning whether Salesforce can maintain its leadership position and growth trajectory against newer, AI-native competitors.

Investment Considerations

Salesforce continues to demonstrate strong execution in its core CRM business while making progress in monetizing its AI investments. The company's shareholder returns through buybacks and dividends remain robust, with an additional $20 billion added to its repurchase authorization.

However, the market's reaction suggests concerns about whether current growth rates are sufficient to justify the valuation in light of increasing competition. Investors will be watching closely to see if the company's AI investments can accelerate growth in coming quarters.

For detailed earnings estimates and historical performance data, visit Salesforce's earnings and estimates page.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Readers should conduct their own research and consult with a qualified financial advisor before making investment decisions.