Salesforce beats earnings but gives weak revenue outlook

Salesforce posted fiscal second-quarter sales that were above the forecasts of Wall Street. Adjusted earnings per share stood at 2.91 as compared to the projected 2.78. The revenues were at $10.24 billion, also higher than the estimated revenues of $10.14 billion. 

This was a 10% improvement on the $9.33 billion that had been recorded a year before. Net income has increased to $1.89 billion as compared to $1.43 billion in the previous year.

Even with these promising outcomes, the company gave projections that failed to meet investors’ expectations. In the fiscal third quarter, Salesforce’s projected adjusted earnings per share will be between $2.84 and $2.86 on revenue of $10.24 billion to $10.29 billion. 

The analysts had been anticipating $2.85 and $10.29 billion in earnings per share and revenue, respectively. Such tight and wary advice caused panic in the market and burdened the stock.

Stock Struggles in 2025

Before this report, the Salesforce stock had been among the worst-performing large-cap technology companies of the year. The stock is down 23% thus far in 2025, second-worst among all Dow stocks. The stock fell 4% in extended trading on Wednesday following the release of the earnings.

Wall Street has become very cautious with the company failing to produce higher growth in revenue. Since mid-2024, the revenue growth has been in the single digits, and it is now questioned whether the company can grow as fast as investors were accustomed to in the previous years.

Artificial intelligence and the pressures of the market

Artificial intelligence has become a significant investment within Salesforce, and its tools are seen as the key to the future of customer relationship management. The company has also implemented its Agent force AI software, which automates customer service. CEO Marc Benioff expects Salesforce to have more than 6,000 paid deals concerning Agent force.

Salesforce has not, however, enjoyed the broader AI boom as its peers, including Nvidia and Microsoft. The reason is that investors are worried that AI-related disruption will damage its traditional business, and the new AI products are not yet powerful enough to mitigate the risk. These concerns are reflected by the fact that the Salesforce enterprise value to free cash flow ratio is at a 10-year low, as noted by analysts at Jefferies.

In response to the negative comments, Benioff has asserted that a lot of the negative chatter surrounding the company is not a customer reality. Nevertheless, the feelings on Wall Street are poor, and that is reflected in the way the shares have been performing. 

This purchase is an extension of Salesforce’s practice of product diversification and increasing its data capacity, which is a core characteristic of AI-based services. Salesforce cemented its standing by declaring in the quarter that it would purchase data management firm Informatica for $8 billion. 

The move is a continuation of Salesforce’s policy of diversifying its product line and expanding its data capacity, which is a crucial component of AI-based services.

Coupled with the plan of acquisition, Salesforce also stated that it would increase the share buyback program by $20 billion, making it $50 billion. Buybacks tend to give shareholders their money back and provide management with an indication that they believe in the future of the company. 

But critics will see the action as an effort to raise the stock price and will not necessarily dive into the underlying growth problems.

Challenges in Core Business

However, despite Salesforce being a leader in customer relationship management software, the company has obvious headwinds. The president and chief operating and financial officer of the company, Robin Washington, acknowledged that Salesforce had been finding it hard to sell its marketing and commerce products. It has become slow in its growth in customers.

This is a big problem since the company uses its vast customer base to purchase more services as time goes on. A slower growth here complicates the process of providing the growth in revenue that investors desired.

Prognosis: Turnaround

Salesforce did not change its annual revenue expectations, which are $41.1 billion to $41.3 billion. The company marginally increased the full-year earnings projection, which now stands at $11.33 to $11.37 adjusted earnings per share. This is better than what was being suggested before; nevertheless, it has not been sufficient to reassure the investors of growth.

The next quarter will be a critical quarter for Salesforce. The company may rebuild its trust should its AI investments begin to create greater demand. The purchase of Informatica can also enhance its product mix. Until then, the market is reserved.