CRM F2Q27 First Take: on headline metrics alone, results were fairly muted, with core revenue and profit broadly in line with expectations. The apparent beat on net income was driven by approx. $2.6bn of investment gains. OP was slightly better than bearish views but flat YoY, which is hardly inspiring.

Ex-FX, revenue growth continued to decelerate modestly, while a higher AI mix kept pressuring GPM. To build AI and drive adoption, R&D and sales & marketing (S&M) ratios kept rising, hence margins are trending down. Similarly, cRPO growth only ticked up by ~50bps vs. last qtr, which is not strong.

Guidance for next qtr and the full year is also largely in line with the Street. Overall, revenue growth looks broadly stable with a slight recovery, while margins keep drifting lower.

On the brighter side, AI is progressing steadily, with Agentforce AI + Data Cloud ARR reaching $3.9bn vs. $3.4bn last qtr. The sequential acceleration remains modest and has yet to drive an inflection in overall results, so it is steady execution rather than a step-change.

Dolphin Research believes the after-hours rally is mainly supported by signs that revenue growth is bottoming, with a small pickup next qtr, alongside steady AI progress. We see more of a narrative reversal: markets had over-feared AI’s impact on SaaS, but recent evidence suggests most traditional SaaS names, while fundamentals are not great, have not shown visible AI-induced disruption.

Therefore, with fundamentals little changed, the prior trend of pure multiple compression is reversing. CRM’s valuation was clearly depressed, leaving ample room to re-rate. $Salesforce(CRM.US)