Salesforce Turns the Corner as AI Fears Start to Fade

Key Points

• Salesforce shares surged after beat-and-raise Q2 results, with $11.35 billion in revenue and adjusted earnings per share of $5.90 topping forecasts by more than $2.60.
• Analysts raised price targets after the report, with 47 tracked analysts holding a Moderate Buy rating and a new high-end target of $400 per share.
• Institutional investors bought aggressively ahead of and after earnings, and the company remains committed to share buybacks and raised full-year subscription revenue guidance.

Salesforce NASDAQ: CRM stock has wallowed for over a year, trending lower and hitting long-term lows in 2026 amid sluggish growth and AI SaaS-pocalypse fears. Sluggish growth is hard to overcome, even for a business generating over $40 billion in annual sales; billions in annual growth only add up to so much as a percentage.

The SaaS-pocalypse was a pressing issue for Salesforce, but the Q2 results have allayed it. While there is a risk that AI can disrupt Salesforce and other software companies' business, the more likely scenario is that it will deploy AI successfully, capitalizing on its leadership position in customer relationship management.

Salesforce Surges After Beat-and-Raise Results

Salesforce stock surged after its Q2 release, signaling a bottom, because the results suggested a major shift. The business is not only reliable but also growing faster than expected, and profitability is off the charts. Profitability is a critical element, as Salesforce is in the midst of another transformation—from a high-growth tech play to a blue-chip, capital-returning machine—and the results provided sufficient confidence for institutional money to resume inflows.

Salesforce reported $11.35 billion in net revenue, underpinned by strength in all segments and regions. Revenue topped the consensus by a slim margin, with subscription and service, the core segment, up by 12%. Signs of strength included annual recurring revenue, approaching $40 billion and up 210% year-over-year (YOY), and Agentic Work Units (AWUs), which measure agentic traffic, up 97% sequentially.

Margin was a strength, but Q2 also included one-offs. Pre-tax gains on investments contributed billions to the bottom line, amplified by a reduced share count and fiscal discipline. While operating margins remained stable, adjusted net income grew by more than 100%, bringing adjusted earnings per share to $5.90, more than $2.60 above forecasts. The critical takeaway is that cash from operations and free cash flow remain solid and sufficient to sustain growth while returning capital to shareholders.

The company did not buy back a significant amount of shares in Q2, but remains on track with its aggressive share repurchase plans. As it stands, the share count is down approximately 12.5% on average at the end of the first fiscal half, and ample authorization remains. The likely outcome is that Salesforce resumes buybacks in the second half and sustains them into the following year as it recognizes revenue and converts it into cash flow.

Guidance was a catalyst for higher share prices. Salesforce issued a strong outlook for Q3 and raised its full-year subscription revenue outlook, reflecting organic strength and the impact of acquisitions. The company is on track to add two more tuck-ins later this quarter in addition to those completed in the prior year.

Analysts and Institutions Signal Bottom for CRM, Point to Full Price Recovery

The initial analyst response to the release was overwhelmingly bullish, with numerous price target increases and reaffirmed targets reinforcing an outlook for a consensus-or-better price point within the next 12 months. Consensus forecasted a 20% upside at the pre-release close, but the trend matters, signaling a bottom and a reversal in sentiment after several quarters of weakening.

As it stands, the 47 analysts MarketBeat tracks show strong conviction in the Moderate Buy rating; the data shows a 57% Buy-side bias and a budding uptrend in price targets. The high-end target, set after the release, is now $400, which would represent a new high.

Institutional activity signaled the bottom before the release. The group owns more than 80% of the stock and bought aggressively in early Q3, with the trailing 12-month balance of buying-to-selling at $4 to $1, and Q3 activity spiking to approximately $100 to $1. With this in play, investors can assume a solid price floor near $165, which, coincidentally, aligns with the low end of analysts' targets.

Looking ahead, analysts and institutions will likely sustain their bullish posture, given the value presented. CRM stock is undervalued relative to its current-year earnings, trading at about 14.5x ahead of the report, suggesting about 50% near-term upside to align with the S&P 500 average and another 50% or more long-term as it grows into its earnings outlook.

Salesforce’s biggest risk, aside from the existential threat of AI disruption, is customer pushback. The company has shifted its pricing models and packages over the past few years to accommodate the rapidly changing AI ecosystem, which caused some friction with customers. However, the Q2 results revealed traction and accelerating usage, suggesting the worst of the trouble is over.

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