When enterprise software maker Salesforce reports Q3 earnings on Tuesday, some analysts will look for preliminary fiscal 2026 guidance. Salesforce stock has advanced 26% in 2025, with much of the gain coming after it unveiled a new artificial intelligence product roadmap in September.
The Salesforce earnings report comes as some software stocks, such as Snowflake, finish the year strongly.
The iShares Expanded Tech-Software Sector ETF, an industry index that includes Microsoft and many big-cap software companies, has gained 29% in 2024, with most of the advance coming since September.
How Will Software Stocks Finish 2024?
Meanwhile, Salesforce stock sold off on Workday's earnings report in late November.
"Clearly, 2024 has been a harrowing year for the software complex and Workday's lackluster results last week indicate the road to recovery is filled with obstacles," said Brian White, analyst at Monness, Crespi, Hardt & Co., in a report. "The gen AI propaganda of 2023 has proven to be a revenue wasteland for software in 2024. However, we believe the industry will begin to derive incremental activity over the next 12 to 18 months. Salesforce has been one of the most vocal gen AI propagators, feverishly introducing new innovations. Most notably, Salesforce is betting big on the future of AI agents through Agentforce."
Further, Salesforce is among AI stocks to watch.
Salesforce recently pivoted to autonomous AI agents. As a result, expectations for monetizing artificial intelligence products have increased.
Salesforce is incorporating AI technology into its broad array of customer management, customer service and marketing automation products. It's hiring more salespeople to woo corporate clients with the AI agent platform.
The big question is whether the new AI push will crimp profit margin expansion – a big Salesforce priority since activist investors pressured the software maker two years ago.
"On the Q3 earnings call, management commentary on balancing investments in new growth opportunities while efficiency initiatives remain ongoing in less productive parts of the organization would be helpful to build investor confidence in an upward trajectory for margin expansion," said Morgan Stanley analyst Keith Weiss in a report.
Salesforce Stock: Agentforce Generates Excitement
In fiscal 2026, which starts with the April quarter, analysts project revenue growth of 9% and EPS growth of 10%.
JPMorgan analyst Mark Murphy recently surveyed the software maker's sales partners.
"The survey shows Agentforce is a high-quality product that is generating real customer excitement, while delineating a material step up from prior innovations in Salesforce's toolchain such as Einstein Copilot/GPT," Murphy said in a report.
He added: "Our view is that the macro environment is not yet all that changed relative to earlier this year, and our expectation is that Agentforce, while a critical development, is unlikely to materially move the needle on revenue growth for about a year given its revenue model and very early stage, just a few weeks into general availability."
Salesforce Earnings Report Estimates
"Salesforce shares are up 32% since the company's Q2 earnings report when it began discussing Agentforce, likely creating a backdrop of elevated investor expectations heading into the print. Thus, following the recent surge, we could envision some typical retracement assuming a conservative first-blush fiscal 2026 growth outlook."
For Q3, analysts project adjusted EPS of $2.44, up 16%, with revenue rising 7% to $9.3 billion.
A key financial metric, current remaining performance obligations, is expected to rise 9% to $26.1 billion. CRPO bookings are an aggregate of deferred revenue and order backlog.
Some analysts will look for CEO Marc Benioff's views on management changes with the chief financial officer's planned departure and the head of AI research leaving for Meta Platforms. Salesforce President Brian Millham's retention agreement comes up for renewal in March 2025.
Salesforce Stock Technical Ratings
According to IBD Stock Checkup, CRM stock holds an IBD Composite Rating of 96 out of a best-possible 99.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. Also, the best growth stocks have a Composite Rating of 90 or better.
In addition, Salesforce stock has an Accumulation/Distribution Rating of B. The rating analyzes price and volume changes in a stock over the past 13 weeks of trading. The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
