With favorable AI applications, Salesforce is expected to see a revenue increase of over 10% this quarter, raising its full-year guidance, and jumping in after-hours trading | Earnings Report Insights

The cloud computing and customer relationship management (CRM) software giant Salesforce has good news regarding the application of artificial intelligence (AI) products. Although revenue for the last fiscal quarter was slightly below expectations, the revenue guidance for the current fiscal quarter is unexpectedly strong, reflecting the company's efforts to persuade customers to purchase its AI products.

Salesforce's guidance indicates that revenue for the current fiscal quarter will achieve double-digit growth for the first time in nearly two years, returning to over 10% faster than Wall Street's expectations, partly due to the acquisition of data integration software manufacturer Informatica. The key financial metric measuring signed but unfulfilled revenue, known as current remaining performance obligations (CRPO), also maintains a double-digit growth trend.

Analysts commented that the CRPO guidance suggests weak spending from enterprise customers, while the successful application of Salesforce's AI platform Agentforce and data platform Data 360 makes them optimistic that these two products are expected to become larger sales drivers starting in the second half of 2026.

After the earnings report was released, Salesforce's stock price, which rose 1.7%, jumped after hours on Wednesday, with an after-hours increase reaching about 8%. As of Wednesday's close, Salesforce's stock price has fallen 28.6% year-to-date. This indicates that as a pioneer in software as a service (SaaS), Salesforce has not benefited from the AI transformation but has instead been hit by recent concerns over the AI bubble.

On December 3rd, Wednesday, after U.S. stock market hours, Salesforce announced its financial data for the third fiscal quarter of 2026 (ending October 31, 2025) and provided performance guidance for the fourth fiscal quarter and the full fiscal year.

1) Key Financial Data:

Revenue: Third-quarter operating revenue was $10.26 billion, a year-on-year increase of 8.6%. The company's guidance is between $10.24 billion and $10.29 billion, with analysts expecting $10.28 billion, and a year-on-year growth of 9.8% in the previous quarter.

EPS: Under non-GAAP standards, diluted earnings per share (EPS) for the third quarter was $3.25, a year-on-year increase of nearly 34.9%. The company's guidance is between $2.84 and $2.86, with analysts expecting $2.86, and a year-on-year growth of 13.7% in the previous quarter.

Operating Margin: The GAAP operating margin for the third quarter was 21.3%, an increase of 1.3 percentage points year-on-year, and an increase of 3.7 percentage points year-on-year in the previous quarter; the non-GAAP operating margin was 35.5%, an increase of 2.4 percentage points year-on-year, and an increase of 0.6 percentage points year-on-year in the previous quarter.

2) Business Data and Financial Metrics:

Subscription and Support: Third-quarter revenue was $9.73 billion, a year-on-year increase of over 9.5%, with a year-on-year increase of 10.6% in the previous quarter

CRPO: The current remaining performance obligations (CRPO) are $29.4 billion, a year-on-year increase of 11%, analysts expected $29.1 billion, and the previous quarter saw a year-on-year increase of 11%.

3) Performance Guidance:

Revenue: The revenue guidance for the third quarter is between $11.13 billion and $11.23 billion, a year-on-year increase of 11.3% to 12.3%, with analyst expectations at $10.91 billion. The full-year guidance is between $41.45 billion and $41.55 billion, previously guided at $41.1 billion to $41.3 billion, a year-on-year increase of 9% to 10%.

EPS: The diluted EPS under non-GAAP for the third quarter is expected to be between $3.02 and $3.04, with analysts expecting $3.03. The full-year EPS is expected to be between $11.75 and $11.77, previously guided at $11.33 to $11.37.

Operating Margin: The full-year operating margin under GAAP is 20.3%, down from 21.2%, while the non-GAAP operating margin remains at 34.1%, unchanged from the previous 34.1%.

Third Quarter Revenue Slightly Below Expectations but EPS Exceeds Expectations

The financial report shows that Salesforce's third-quarter revenue grew nearly 9% year-on-year, slightly slowing from nearly 10% growth in the previous fiscal quarter and slightly below analyst expectations. The total revenue is approximately $10.26 billion, roughly in the middle of the company's own guidance range, slightly below analyst expectations.

However, Salesforce's EPS for the third quarter significantly exceeded expectations. The non-GAAP EPS surged nearly 35% year-on-year to $3.25, 14% higher than the midpoint of the company's guidance range and 13.6% above analyst expectations.

The key financial metric CRPO order size grew 11% year-on-year to $29.4 billion, slightly above analyst expectations, with growth rate consistent with the previous quarter.

Salesforce's AI-related business performed exceptionally well in the third quarter. Salesforce's CEO Marc Benioff specifically mentioned during the performance commentary that the annual recurring revenue (ARR) for Agentforce and the formerly named Data Cloud platform, Data 360, is nearly $1.4 billion, a year-on-year increase of 114%.

This indicates that Salesforce's AI and Data Cloud platform ARR grew nearly 17% quarter-on-quarter, maintaining a triple-digit growth momentum since entering 2025.

Fourth Quarter Revenue Expected to Exceed 10% Growth for the First Time in Nearly Two Years, CRPO Growth Rate at Its Highest in Over Two Years

The performance guidance indicates that Salesforce's revenue in the fourth quarter will accelerate and exceed analyst expectations, returning to double-digit growth.

Based on the midpoint of the guidance range, Salesforce expects fourth-quarter revenue to grow by 11.8%, which would be the first quarter in seven quarters to exceed 10% growth, while analyst expectations indicate a revenue growth of 9.1%, only slightly faster than the third quarter Salesforce's financial report also mentioned that the CRPO for the fourth quarter is expected to grow by approximately 15% year-on-year, exceeding analysts' expectations of 10%.

If this guidance is met, it would mean that Salesforce's CRPO will achieve the highest year-on-year growth rate in over two years since the second quarter of the 2023 fiscal year. Moreover, revenue is expected to reach double-digit growth faster than Wall Street's expectations. Three months ago, Wall Street Insights noted that market expectations indicated Salesforce's revenue growth might not return to double digits until the 2029 fiscal year.

This stronger guidance is supported by the Informatica business. Salesforce disclosed that it completed the acquisition of Informatica in the third quarter, with 3 percentage points of growth in the revenue guidance coming from Informatica, and Informatica contributing 4 percentage points to the CRPO-related guidance.

Salesforce also raised its annual revenue guidance range, marking the second increase since announcing its performance for the 2026 fiscal year.

This time, Salesforce raised the lower end of the guidance range by $350 million, an increase of 0.85%, and the upper end by $250 million, an increase of 0.6%. However, according to the latest guidance, revenue for this fiscal year is expected to grow by only about 10% at best, far from regaining its former glory. Salesforce's revenue growth rate had approached 20% in prosperous years.

AI Transformation and Valuation Divergence: Bubble Concerns Spread to Software Layer

Before the financial report was released, media pointed out that Salesforce's valuation had fallen to its lowest point since its IPO in 2004, with a price-to-earnings ratio based on expected earnings for the next 12 months dropping to about 19 times, well below its ten-year average of 47 times and lower than the S&P 500 index's price-to-earnings ratio of about 22 times, significantly below the valuation levels of many large software peers.

Currently, Salesforce is no longer being judged based on its AI future but rather being scored based on its AI risks. The SaaS sector tracked by Morgan Stanley has dropped 12% this year, generally suppressed by concerns over AI disruption. Investors are increasingly worried that AI will impact companies that charge users for applications, as automation will take over some jobs and reduce the number of employees for corporate clients.

Commentators believe that Salesforce is experiencing a serious disconnect between the AI narrative and market pricing. The vision painted by the company's management is that by the end of 2030, it will achieve over $60 billion in annual revenue through AI, data, and automation. However, the reality presented by the market is that stock prices continue to lose value, with valuations dropping to their lowest level since the company's IPO, as more and more investors associate AI with "bubbles" rather than "growth potential."

The current macro environment makes market anxiety more reasonable. Media pointed out that central banks and analysts around the world are openly expressing concerns about an AI bubble, excessive data center construction, and too much leverage chasing overly grand ideas.

NVIDIA and hyperscale cloud service providers are still seen as the pure winners of this wave of AI infrastructure, while large SaaS companies that are experiencing growth slowdowns and attempting immediate transformations find themselves in an awkward position; they are neither hot enough to ride the wave of enthusiasm nor dull enough to become a safe haven, yet suddenly cheap enough to be at "historical lows." Salesforce does have its own AI products, especially Agentforce launched in October last year, which can automate some workloads. However, investors do not currently expect these products to contribute significantly to financial performance, so it remains uncertain whether Salesforce can thrive in the AI era. Wall Street's wait-and-see attitude also confirms this, as the market's general expectations for the company's earnings and revenue next year have not changed over the past 12 months.

Citi analyst Tyler Radke wrote in a report last week: "Although Agentforce/Data Cloud has a large potential customer base, the actual application of Agentforce remains limited. We look forward to seeing broader promotion and commercialization results before considering a more positive stance on Salesforce."