Salesforce Before Q2 Earnings: Should You Buy, Sell or Hold the Stock?

Salesforce CRM is scheduled to release second-quarter fiscal 2026 results on Sept. 3.

For the fiscal second quarter, the company expects total revenues to be between $10.11 billion and $10.16 billion (midpoint at $10.135 billion). The Zacks Consensus Estimate for second-quarter revenues is pegged at $10.13 billion, which indicates an increase of 8.7% from the year-ago quarter’s reported figure.

CRM anticipates non-GAAP earnings per share in the band of $2.76-$2.78 for the second quarter. The consensus mark for non-GAAP earnings has remained unchanged at $2.77 per share over the past 60 days, which calls for an 8.2% jump from the year-ago quarter’s level.

Salesforce’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average surprise being 4.2%.

Earnings Whispers for Salesforce

Our proven model does not conclusively predict an earnings beat for Twilio this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Twilio has an Earnings ESP of 0.00% and a Zacks Rank #5 (Strong Sell) at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Factors Likely to Influence Salesforce’s Q2 Results

Salesforce appears well-positioned to report strong second-quarter results, driven by its strategic focus on digital transformation and cloud solutions. With businesses globally undergoing digital overhauls, Salesforce's commitment to aligning its product offerings with customer needs is likely to have boosted its revenues for the quarter.

The growing demand for generative AI-enabled cloud solutions has been a major catalyst for Salesforce. By embedding generative AI tools across its products, the company not only enhances customer engagement but also strengthens its competitive position in the customer relationship management space. This forward-thinking approach might have significantly contributed to its top-line growth during the to-be-reported quarter.

Salesforce’s ability to deepen relationships with leading brands across industries and expand its reach in key geographic markets remains a cornerstone of its growth strategy. The company’s increasing footprint in the public sector is likely to have provided a further boost, unlocking new growth opportunities during the second quarter.

The acquisitions of Spiff, Own and Zoomin have been pivotal in enhancing Salesforce's capabilities and diversifying its revenue base. These additions are likely to have driven higher subscription revenues, particularly across its core cloud services. Salesforce’s key cloud offerings, including Sales, Service, Platform & Other, Marketing & Commerce and Data, are expected to have delivered robust growth.

Our second-quarter revenue estimates for Sales, Service, Platform & Other, Marketing & Commerce and Integration & Analytics cloud services are pegged at $2.28 billion, $2.49 billion, $2 billion, $1.4 billion and $1.45 billion, respectively. We expect revenues of approximately $9.6 billion and $545.8 million for the Subscription and Support segment and the Professional Services division, respectively.

The ongoing cost restructuring initiative is likely to have boosted Salesforce’s profitability in the second quarter. The company’s first-quarter fiscal 2026 non-GAAP operating margin expanded 20 basis points to 32.3%, mainly driven by the benefits of cost restructuring initiatives, which include the trimming of the workforce and a reduction in office spaces.

CRM’s Stock Price Performance & Valuation

Over the past year, Salesforce shares have risen 0.8%, underperforming the Zacks Computer – Software industry’s rise of 20.1%. Compared to its peers, CRM stock has also underperformed other enterprise software makers, including SAP SE SAP, Oracle ORCL and Microsoft MSFT. Over the past year, shares of SAP, Oracle and Microsoft have gained 25.3%, 69.9% and 22.3%, respectively.

One-Year Price Return Performance

Now, let’s look at the value Salesforce offers investors at the current levels. CRM stock is trading at a discount with a forward 12-month P/S of 5.62X compared with the industry’s 8.43X.

Forward 12-Month P/S Ratio

CRM stock also trades at a discounted multiple compared with SAP, Oracle and Microsoft. At present, SAP, Oracle and Microsoft have P/S multiples of 7.36, 9.69 and 11.53, respectively.

Investment Thesis for Salesforce Stock

Salesforce is the undisputed leader in the customer relationship management industry, consistently outpacing rivals like Microsoft, Oracle and SAP. Gartner’s annual rankings reaffirm its top position year after year. Its ability to maintain this dominance stems from its expansive product suite, seamless integrations and innovative approach to enterprise solutions.

Strategic acquisitions have played a crucial role in strengthening its market position. The $27.7-billion acquisition of Slack in 2021 significantly enhanced its collaboration capabilities, making Salesforce a comprehensive enterprise software provider. More recently, the $1.9-billion acquisition of Own Company in 2024 bolstered its data protection and AI capabilities, a move that aligns with growing enterprise priorities around security and automation.

Salesforce’s AI initiatives further cement its leadership. Since introducing Einstein GPT in March 2023, the company has expanded its AI-driven functionalities across its entire ecosystem. This technology enhances automation, streamlines workflows and improves customer interactions, giving Salesforce a significant advantage as AI adoption accelerates across industries.

Nonetheless, Salesforce’s near-term prospects might be hurt by softening IT spending. Enterprises are postponing their large IT spending plans due to a weakening global economy amid ongoing macroeconomic and geopolitical issues. This does not bode well for Salesforce’s prospects in the near term.

Conclusion: Hold CRM Stock Ahead of Q2 Results

The company’s leadership in customer relationship management, aggressive AI expansion and increasing enterprise IT spending trends create a solid foundation for sustained growth. Its ability to deliver earnings growth despite ongoing macroeconomic uncertainties makes the stock worth holding.

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This article originally published on Zacks Investment Research (zacks.com).

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