Salesforce (CRM) Stock: Earnings Crush Estimates as AI Business Explodes 330%

TLDR

• Salesforce posted Q3 earnings of $3.25 per share, beating estimates of $2.86, but revenue of $10.26 billion slightly missed the $10.27 billion forecast.
• Q4 revenue guidance of $11.13-$11.23 billion topped analyst expectations of $10.9 billion, with the forecast including 3 percentage points from the Informatica acquisition.
• Agentforce AI software revenue hit over $500 million in annual recurring revenue, up 330% year-over-year, with more than 9,500 paid deals secured.
• Operating profit margin reached 35.5% in Q3, up from 33.1% last year, showing continued improvement in profitability despite slower revenue growth.
• The stock is down 29% year-to-date through Dec 3, underperforming the Nasdaq’s 21% gain, as investors worry about AI disruption to core products.

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Salesforce delivered a mixed bag of results for its fiscal third quarter ended October 31. The company beat earnings expectations but came up just short on revenue.

Adjusted earnings per share landed at $3.25, crushing Wall Street’s estimate of $2.86. Revenue reached $10.26 billion, a hair below the $10.27 billion analysts expected.

The earnings beat tells a bigger story. Profitability jumped across the board.

Salesforce, Inc., CRM

Net income climbed to $2.09 billion from $1.53 billion in the same quarter last year. The company’s adjusted operating profit margin hit 35.5%, well above the expected 34.1% and last year’s 33.1%.

Free cash flow grew 22% to $2.18 billion. That missed the StreetAccount consensus of $2.24 billion but still showed strong cash generation.

The stock popped 2% in after-hours trading following the announcement. But shares remain down 29% for 2025, badly trailing the Nasdaq’s 21% gain.

Strong Q4 Guidance Provides Upside

The company’s forward-looking statements caught investors’ attention. Salesforce expects fourth-quarter revenue between $11.13 billion and $11.23 billion.

That range tops analyst estimates of $10.9 billion. The guidance includes about 3 percentage points of growth from Informatica, the data management company Salesforce bought for around $8 billion in November.

Adjusted earnings per share for Q4 should land between $3.02 and $3.04. Analysts had projected $3.04.

The forecast implies revenue growth of 11% to 12% for the quarter. CFO Robin Washington noted the guidance accounts for continued cloud migration of MuleSoft and Tableau products, plus ongoing weakness in marketing and commerce offerings.

Washington explained that Tableau saw a higher mix of cloud services than predicted during the quarter. This shift affects revenue recognition timing, with on-premises products booked immediately versus cloud services recognized over time.

AI Products Gaining Traction

Agentforce emerged as a bright spot in the results. The AI software platform, which automates sales and customer service workflows, generated over $500 million in annualized revenue during Q3.

That represents a 330% jump from a year earlier. Salesforce has now closed more than 9,500 paid Agentforce deals, up from over 6,000 in September.

The company acquired two AI startups during the quarter. Regrello builds AI software that performs tasks automatically.

Waii uses AI to write code for data queries based on simple text prompts. Salesforce also launched Agentforce tools for managing IT service requests.

The AI push comes as Salesforce faces questions about whether artificial intelligence could replace some of its core product features. The company believes these new offerings can reignite double-digit revenue growth.

Salesforce issued a $60 billion revenue target for fiscal 2030 during the quarter. That goal exceeds what analysts had projected.

Revenue grew 8.6% year-over-year in Q3, continuing a pattern of slower growth compared to the company’s historical performance. From 1999 to 2022, Salesforce never posted annual growth below 20%.

The company has shifted focus to profitability as growth has moderated. Free cash flow margin reached 33% in fiscal 2025, up from 20% in fiscal 2023.

Salesforce has used this cash for dividends and buybacks, reducing its share count by 4.9%. The Informatica acquisition closed in November for approximately $8 billion.

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