Salesforce Earnings Might Have Been Good Enough to End Its Stock’s 3 Quarter Losing Streak

Marc Benioff, chief executive officer of Salesforce. (Michael Short/Bloomberg)

Key Points

• Salesforce reports adjusted earnings per share of $3.25, exceeding estimates, with revenue of $10.26 billion, slightly below expectations.
• The company’s adjusted operating profit margin increases to 35.5% from 33.1% last year.
• Salesforce’s annual recurring revenue from agentic AI products reaches $540 million, an increase of $100 million in three months.

Salesforce stock was rising Thursday after the company reported better-than-expected third-quarter earnings but missed on revenue. The company has fallen despite earnings beats in recent quarters, but look set to end that losing streak.

Salesforce earnings, as per usual, were fine. Late Wednesday, it reported adjusted earnings of $3.25 a share, well ahead of Wall Street’s consensus estimate of $2.86, and up from $2.41 last year. Revenue for the quarter reached $10.26 billion, just shy of expectations for $10.27 billion, and up 9% on the year.

Despite the small miss on third-quarter revenue, guidance for the fourth quarter and the full fiscal year was strong, as was profitability, which soared in the third quarter. The company’s adjusted operating profit margin of 35.5% came in ahead of expectations for 34.1%, and was up from 33.1% last year.

Salesforce stock closed up 3.7% on Thursday, but had been up as much as 4.9% in after-hours trading on Wednesday. Shares have declined 29% in 2025 at Wednesday’s close. If the stock finishes higher, it will end a three-quarter losing streak for the stock, which had fallen after each of the last three reports, despite earnings beats.

“Overall the results are an incremental positive against largely negative investor sentiment, though we aren’t convinced it is a turning point for the story,” Citi analyst Tyler Radke said in a note Thursday. He has a Neutral rating on the stock with a $253 price target—which is 6% upside to Wednesday’s closing price of $238.72.

J.P. Morgan analyst Mark Murphy was more bullish and said Salesforce’s “rare revenue miss” was overshadowed by strong bookings momentum. He has an Overweight rating on the stock with price target of $365.

“Salesforce has transformed into a highly profitable and cash-generative business, and we continue to see eventual upside from current levels as the company balances growth with profitability and FCF (free cash flow) generation while infusing Generative AI capabilities into its clouds,” he said in a note Thursday.

Wedbush analyst Dan Ives said the software company’s earnings were a “step in the right direction,” but that there’s still “a long way to go” as its Agentforce strategy—AI agent offering—builds momentum. He has an Outperform rating and $375 price target.

Salesforce had an unusually long stretch of high sales growth that extended from its founding in 1999 to 2022, never dipping below 20% growth in that period. But its industry-leading customer relationship management software has neared saturation, and annual sales growth began slowing the following year, down to 8.7% in fiscal year 2025, which ended in January. Thus far in fiscal year 2026, sales are also up 8.7% from the year before.

But in the process, Salesforce has become a more profitable company, with a free cash flow margin of 33% in 2025, versus 20% in 2023. It has used some of that cash for dividends and buybacks, reducing the share count by 4.9% in the process. It’s a classic case of growth turning into value.

At the same time, Salesforce is caught up in the maelstrom of artificial intelligence, and how it could disrupt its business. Like many competitors, it’s turning to selling generative AI software products to its customer base. Chief among these are agents—software that can use AI models to accomplish a complex series of tasks from a simple prompt. Salesforce is selling its customers on the promise of being able to automate large portions of their workflows, especially the tedious tasks.

As we’ve seen elsewhere, like at Microsoft, this has been tough sledding with enterprise customers who are being very cautious about implementing AI throughout their organizations.

Salesforce has been more transparent than most about its progress here, revealing actual dollar amounts in contracts. At the end of the third quarter, it had booked annual recurring revenue of $540 million from agentic AI products, up by $100 million from just three months before. While this is only about 1.2% of the company’s projected revenue for the next 12 months, it provides a starting point to help understand how Salesforce’s AI initiatives are faring.

The company believes that AI can get it back to double-digit percentage sales growth again.

Write to Adam Levine at adam.levine@barrons.com