Salesforce Stock Climbs Despite Earnings Miss, Fueled by AI Optimism
Salesforce Inc. (CRM) shares experienced a significant surge on Wednesday, defying expectations after the company reported a third-quarter earnings miss. While the company fell short of projected earnings per share, positive indicators surrounding its AI initiatives, particularly the promising early adoption of its Agentforce platform, and strong remaining performance obligations (RPOs) propelled investor confidence and sent the stock price climbing. This unexpected positive market reaction highlights the growing importance of artificial intelligence in the enterprise software sector and underscores investors’ belief in Salesforce’s potential to capitalize on this burgeoning market.
Key Takeaways: Salesforce’s Q3 Earnings and the AI Factor
- Earnings Miss, but Positive Market Reaction: Salesforce reported a third-quarter earnings miss, yet its stock price increased significantly, driven by strong RPO growth and the impressive early adoption of its AI-powered Agentforce platform.
- Agentforce’s Stellar Debut: The company reported over 200 paying Agentforce deals within a week of its general availability, exceeding even optimistic expectations from analysts.
- Double-Digit cRPO Growth: Maintaining double-digit current Remaining Performance Obligation (cRPO) growth for the second consecutive quarter indicates continued strong demand for Salesforce’s products and services.
- Analyst Upgrades and Positive Outlook: Multiple analysts upgraded their price targets for Salesforce stock, citing the potential of Agentforce and the company’s overall position within the AI landscape. Many referred to Salesforce as the “best way to play AI” within their coverage.
- Strategic Investments and Future Growth: The earnings miss was partially attributed to strategic investments made by Salesforce, suggesting a focus on long-term growth and innovation, particularly in the AI space.
Salesforce’s Q3 Earnings: A Deeper Dive
Salesforce’s third-quarter earnings report presented a mixed bag. While the company missed expectations on earnings per share, several key metrics highlighted a positive trajectory. Total revenue reached $9,444 million, exceeding Street estimates of $9,351 million. This revenue beat, coupled with the significant gains in other areas, fueled the strong market response.
Remaining Performance Obligations (RPOs) and cRPO Growth
The company reported current RPOs of $26.4 billion, exceeding the consensus estimates of $26.1 billion and showcasing a 10% year-on-year growth. The consistent double-digit growth in current RPO (cRPO) for two consecutive quarters strongly indicates a healthy pipeline and robust demand for Salesforce’s offerings. This metric is particularly significant, reflecting the value of future revenue streams. Analysts noted that even without significant contributions from Agentforce and Data Cloud yet, this double-digit growth remained strong.
Agentforce: The AI Game-Changer?
The overwhelming success of Agentforce, Salesforce’s AI-powered platform for automating tasks and improving customer service, was a major driver of the positive market response. The fact that over 200 paying deals were closed within just one week of its general availability suggests remarkable initial market traction and validates the company’s strategic investment in AI. Analysts emphasized the impressive velocity of Agentforce adoption, with many believing it showcased Salesforce’s successful entry into this space. The impressive early adoption indicates significant customer interest and provides strong evidence of market demand for AI-powered solutions within the enterprise sector. However, some analysts also cautioned about managing expectations moving forward.
Data Cloud Integration and Potential Challenges
While Agentforce garnered significant attention, analysts also noted the role of Data Cloud, and the potential friction between its adoption and Agentforce’s uptake. Although Salesforce reported that 25% of the Fortune 100 companies had adopted Data Cloud, concerns exist over the relatively small percentage of its overall installed base that currently uses it. The integration and synergy between Data Cloud and Agentforce will be crucial going forward in enhancing the capabilities of both platforms. More will need to be understood about how the data aspect impacts Agentforce adoption.
Financial Guidance and Margin Expansion
Salesforce raised the midpoint of its fourth-quarter guidance for total revenue by approximately $50 million. While the overall fourth-quarter revenue guidance slightly missed consensus estimates, this was largely overshadowed by the strong results of the third quarter. Equally significant was the improvement in operating margins, reaching 33.1% – exceeding consensus by 80 basis points. The increase in full-year margin guidance by 10 basis points is a testament to the company’s efficient cost management and the sustainability of margin expansion despite investing heavily in AI.
Analyst Perspectives: A Range of Opinions
Analyst opinions on Salesforce following the Q3 earnings varied, highlighting the complexity of interpreting the results. However, the majority expressed a positive outlook, with several analysts upgrading their price targets. These sentiments reflect the excitement around Agentforce and its potential as a significant revenue driver. The overall analyst community exhibited a balance between optimism and caution, as expectations are high for Agentforce and its role in future revenue growth.
Positive Outlooks Focusing on AI Growth
Analysts like J. Parker Lane, Rishi Jaluria, Mark Murphy, Keith Bachman, Brian Schwartz, Scott Berg, and Brad Sills maintained or upgraded their ratings, emphasizing the potential of Agentforce and Salesforce’s leading position in the AI market. They highlighted the beat on several key metrics as validation of the company’s strategy. **”Salesforce is ‘the best way to play AI within our coverage universe'”** stated Lane. **Schwartz expects top-line revenue growth reacceleration as soon as F2Q:26.** **Sills characterized Salesforce as “leading the way in the agentic AI cycle with Agentforce,” noting “meaningful customer interest”**. These sentiments showcase a bullish outlook on Salesforce’s long-term prospects.
Cautious Optimism and Long-Term Outlook
Other analysts, like Brent Bracelin and John DiFucci, while acknowledging the positive aspects of the report, expressed a more measured outlook. Bracelin pointed out that revenue growth slowed due to persistent macroeconomic headwinds, noting that **”F2026 is shaping up to be an important transitional year for CRM”**. DiFucci highlighted that the success of several key metrics was somewhat “driven by early renewals more than strong new bookings” and that **”Street expectations of 9% revenue growth in fiscal 2026 appears ‘optimistic'”**. These more measured views acknowledge the challenges that remain for Salesforce in the near-term whilst still viewing the long-term prospects positively.
Conclusion: Salesforce Navigates a Shifting Landscape
Salesforce’s Q3 earnings report showcased a company navigating a complex market environment. While the earnings miss initially raised eyebrows, the positive reaction from the market underscores the transformative potential of Agentforce and the overall belief in Salesforce’s position in the evolving world of enterprise AI. The impressive adoption of Agentforce, coupled with sustained double-digit cRPO growth, demonstrates resilience and a strong path towards future growth. Although some analysts remain cautious about near-term challenges, the excitement surrounding Salesforce’s AI initiatives paints a positive picture of its long-term prospects.
