AI Adoption and Cloud Growth to Boost Salesforce's Q2 Earnings?

Salesforce, Inc. CRM is set to release its second-quarter fiscal 2026 earnings on Sept. 3, and the spotlight is on how well its AI and cloud bets are paying off. Businesses are still investing in digital tools, and Salesforce has been quick to ride on that wave with cloud-first software and AI-driven features.

Despite a tough macro environment, the company is expected to show steady growth in both revenues and profits. Its broad product lineup and global presence give it a solid base. However, weaker tech spending from smaller businesses and slower deal-making cycles might have hindered growth from accelerating sharply in the to-be-reported quarter.

Click here to know how Salesforce’s overall fiscal second-quarter results are likely to be.

AI and Cloud Push Keep Salesforce Ahead

Salesforce remains one of the strongest names in enterprise software because its cloud-based model fits right into today’s work environment. Remote and hybrid setups made cloud tools essential, and now AI is the new differentiator.

The company’s AI push, especially with Einstein Analytics and generative AI features, is expected to be a big driver in the second quarter. These tools help clients with customer engagement, sales forecasting and automation, giving Salesforce a clear edge over rivals.

The company offers a wide range of products, from sales and marketing tools to commerce and customer service platforms. This variety helps it stay steady, even when some industries cut back on software spending. Additionally, AI adoption is still in its early innings, and Salesforce looks well-positioned to capture long-term demand.

Global Expansion Adds Fuel to Salesforce’s Growth

Salesforce’s success isn’t limited to the United States. The company has been expanding into international markets, tapping into the rising demand for digital tools from companies across Europe and the Asia-Pacific region.

Many of these businesses are just beginning their digital and AI journeys, and Salesforce’s cloud-based products are seen as flexible and scalable solutions. This global expansion is likely to have played an important role in supporting CRM’s revenue growth in the second quarter.

Macro Risks Still a Drag on Salesforce’s Progress

While Salesforce is growing, it’s not completely shielded from the broader economic slowdown. Smaller businesses, a big part of its customer base, are watching their budgets more closely and slowing down spending on IT and software amid the ongoing macroeconomic uncertainties and geopolitical issues.

Salesforce has already noted that deals are taking longer to close. Customers are taking more time to review contracts and pricing, which can reduce the size of deals and delay when revenues are recognized. These slower deal cycles may have some impact on second-quarter numbers.

Still, Salesforce’s core Subscription and Support segment is expected to hold up well. Our estimate suggests it brought in about $9.61 billion in the quarter, up 9.6% year over year. This implies customers are sticking with the platform despite the tough economic environment.

Salesforce’s Profitability Push Pays Off

One of the most important changes at Salesforce over the past year has been its push for better profitability. Through cost-cutting, staff reductions and improving how it operates, the company has been able to increase earnings, even with slower revenue growth.

Even if deal sizes shrink a bit, Salesforce’s ability to control costs puts it in a good position to grow profits. Its leadership in the customer relationship management space, combined with opportunities to upsell AI tools to existing customers, should help the company continue improving its margins over time.

CRM anticipates non-GAAP earnings per share to be 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% increase from the year-ago quarter’s level.

Salesforce’s Zacks Rank and Stocks to Consider

Currently, CRM carries a Zacks Rank #3 (Hold).

F5 FFIV, Qualys QLYS and Arista Networks ANET are some better-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. F5 and Qualys each sport a Zacks Rank #1 (Strong Buy) at present, while Arista Networks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for F5’s fiscal 2025 earnings has moved upward by 5.4% to $15.38 per share in the past 30 days, indicating 15% year-over-year growth. F5 shares have soared 54.2% in the trailing 12 months.

The Zacks Consensus Estimate for Qualys’ 2025 earnings has been revised upward by 18 cents to $6.35 per share in the past 30 days, suggesting a year-over-year increase of 3.6%. Qualys shares have gained 8.5% over the past year.

The Zacks Consensus Estimate for Arista Networks’ 2025 earnings has moved northward by 25 cents to $2.81 per share over the past 30 days and implies a year-over-year decrease of 23.8%. Arista Networks shares have jumped 54.6% over the past year.

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

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