Accelerated AI and Cloud Adoption to Aid Salesforce's Q3 Results

Salesforce, Inc. CRM is set to release its third-quarter fiscal 2026 earnings on Dec. 3, and expectations are high. The company continues to benefit from the growing trend of digital transformation, as more businesses move to the cloud and look for ways to integrate artificial intelligence (AI) into their operations.

Even though the broader economy is facing headwinds, Salesforce is expected to deliver decent revenue and profit growth. Demand remains strong for its cloud-based software and AI-powered tools. The company is also gaining traction in international markets.

However, challenges such as slower deal-making and reduced tech spending by smaller firms could limit Salesforce’s upside this quarter.

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

Salesforce Gains From AI and Cloud Adoption

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 third 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.

Overseas Expansion Fuels 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 third 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 third-quarter numbers.

Still, Salesforce’s core Subscription and Support segment is expected to hold up well. Our estimate suggests it brought in about $9.7 billion in the quarter, up 9.2% year over year. This implies customers are sticking with the platform despite the tough economic environment.

CRM’s Cost-Cutting Initiatives to Boost Profitability

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 $2.84-$2.86 for the third quarter. The consensus mark for non-GAAP earnings has remained unchanged at $2.85 per share over the past 60 days, which calls for an 18.3% increase from the year-ago quarter’s level.

Salesforce’s Zacks Rank and Stocks to Consider

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

Adobe ADBE, Blackbaud BLKB and Open Text OTEX are some better-ranked stocks that investors can consider from the Zacks Computer – Software industry. Adobe, Blackbaud and Open Text each carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Adobe’s fiscal 2026 earnings has been revised downward by 4 cents to $23.53 per share over the past 30 days and suggests a year-over-year increase of 13.3%. Adobe shares have plunged 28% year to date.

The Zacks Consensus Estimate for Blackbaud’s 2025 earnings has been revised upward by a penny to $4.41 per share in the past 60 days, calling for a year-over-year rise of 8.4%. Blackbaud shares have declined 23.7% year to date.

The Zacks Consensus Estimate for Open Text’s fiscal 2026 earnings has moved northward by 6 cents to $4.21 per share over the past 30 days and implies a year-over-year increase of 10.2%. Open Text shares have jumped 18.8% year to date.

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

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