Salesforce on Wednesday reported better-than-expected quarterly results and provided guidance that, on its face, seemed strong. But the market response was muted, as investors discovered what was really driving the improved outlook. Revenue in its fiscal 2026 first quarter rose 8% year over year to $9.83 billion, topping expectations of $9.75 billion, according to LSEG. Adjusted earnings per share (EPS) in the three months ended April 30 totaled $2.58, beating the consensus estimate by 4 cents, LSEG data showed. On a year-over-year basis, adjusted EPS was up 6%. Salesforce’s stock was volatile in extended trading Wednesday night, initially jumping about 5% before surrendering almost all of those gains. Shortly after its conference call with analysts concluded, the stock was up a little more than 1%. The enterprise software company came into the earnings release in need of a spark, having lost the momentum built last fall on the launch of its new AI offering Agentforce. Shares were down 18% year to date as of Wednesday’s close, trailing both the S & P 500 , which was up 0.3%, and a popular software exchange-traded fund known as the IGV , which advanced around 3%. Salesforce crushed both the S & P 500 and IGV in the final four months of 2024 — a period that included the unveiling of Agentforce in September and its general availability in late October. Its all-time closing high of $367.87 a share came on Dec. 4. CRM 1Y mountain CRM 1-year return Bottom line We had some reservations about Salesforce ahead of Wednesday’s release, recognizing that an uncertain economic backdrop has previously pressured enterprise software spending. Our hope was that Salesforce’s two AI products — Data Cloud and the newer Agentforce — would show additional traction with customers and suggest that revenue growth could return to double-digit percentages sooner than Wall Street expects. Keep in mind: When Salesforce reported earnings in late February, executives said they expected a “modest” contribution this year from Agentforce, a suite of tools to build so-called AI agents that can perform tasks without human intervention. Meanwhile, Data Cloud helps customers organize and unify their data, and it is basically seen as laying the groundwork for Agentforce adoption. Based on everything we heard Wednesday night, we’re not ready to get super bullish on the stock. However, at current levels and valuation it would be unwise to jump off the train. There is momentum on AI and the long-term opportunity for Agentforce is still huge. For that reason, the stock should leave the station within the next couple of quarters. We’re reiterating our buy-equivalent 1 rating, while lowering our price target to $350 a share from $400 to account for the skepticism in the marketplace around Salesforce’s growth trajectory. Commentary The good news is that Wednesday’s results showed progress on AI, with Salesforce saying that the combined annual recurring revenue (ARR) for Data Cloud and Agentforce is more than $1 billion, up from the $900 million provided in February. In an interview Wednesday on “Mad Money,” CEO Marc Benioff told Jim Cramer that Agentforce, in particular, is now an “over $100 million ARR product.” Additionally, nearly 60% of the company’s largest 100 deals in the quarter included both Data Cloud and Agentforce. Salesforce also said it has closed more than 8,000 deals involving Agentforce since its launch, with half of those being paid deals. In February’s earnings report, the company said those numbers were 3,000 paying customers and 2,000 non-paying trials. That is a clear sign that customer interest is growing. Benioff called out Pepsi and the Latin American department store chain Falabella as two customers using Agentforce. Considering the stock’s underperformance, investors should theoretically be stoked that Salesforce’s second-quarter revenue and earnings guidance came in above expectations, and that its full-year outlook also was increased for both of those important metrics. However, the reason investors’ excitement may be more measured Wednesday night is that Salesforce is now seeing a benefit from the weaker U.S. dollar when the company was initially baking in foreign-exchange headwinds into its guidance. The U.S. dollar index, which measures the greenback against a basket of other currencies including the euro and Japanese yen, has fallen considerably since Salesforce reported in February, as President Donald Trump’s evolving trade policy ripples through financial markets. That provides an on-paper benefit to Salesforce and other multinational companies as they convert the business they’ve done overseas in stronger currencies back into now-weaker dollars. But in general, it doesn’t really say anything about a firm’s underlying business, which is why investors may not reward a company benefiting from foreign exchange tailwinds. Indeed, on the call, CFO Robin Washington explained that the company now expects a $250 million tailwind to revenue from foreign exchange this fiscal year, up $400 million from its prior guidance. Accordingly, the high end of Salesforce’s fiscal 2026 revenue outlook was raised by $400 million, to $41.3 billion. On a constant currency basis, which removes these foreign exchange fluctuations, the company still sees subscription and support revenue growth of roughly 9% this fiscal year. In his interview with Jim, Benioff acknowledged that Salesforce was benefiting from the weaker dollar, but he argued the actual business is improving, too. “Currency was working in our favor,” Benioff told Jim. However, he continued, “Bookings are in working in our favor. Revenue is working in our favor. Everything is working in our favor. And sometimes, when everything is going well for you, it’s all good. Sometimes everything is not going well, but right now, we are just going to have a great year.” Salesforce Why we own it : Salesforce is a leading enterprise software tool for companies across all industries, helping employees to better communicate with colleagues internally and with their customers. The company’s balance of margin expansion with the potential for faster topline growth — aided by AI adoption — should lead to strong earnings growth. Competitors : SAP , Microsoft , HubSpot Most recent buy : March 5, 2025 Initiation : June 15, 2018 There was another push-pull in Salesforce’s results: Remaining performance obligation (RPO) in the quarter was better than expected, and the same goes for current RPO, or cRPO. RPO is the total value of contracted revenue, while cRPO measures the amount of contracted revenue expected to be recorded in the next 12 months. At the same time, as seen in the chart above, the performance of Salesforce’s individual applications — such as Sales Cloud and Service Cloud — fell short of expectations. One of the narratives pushed by investors who are bearish on Salesforce is that its core business was being neglected at the expense of AI initiatives that will take time to materialize. Our pushback has been that the AI opportunity is so significant that Salesforce needs to pursue it aggressively. Encouragingly, Salesforce’s integration and analytics segment, which houses Data Cloud and Agentforce, delivered stronger-than-projected revenues in the first quarter. So while Wednesday’s results are unlikely to put this bear narrative to rest, the counter argument is in good shape over the long term. Commentary on Informatica As expected, Salesforce’s $8 billion acquisition of Informatica, which was announced Tuesday, was a point of discussion on the call. Informatica makes data management and integration software — basically, it’s a collection of tools to help companies track and analyze the diverse types of data collected by the firm. While the amount of data that companies collect has exploded in recent years, it tends to be stored across multiple systems and in various formats — a problem called “data fragmentation” within the industry. Informatica’s software seeks to address this fragmentation. Benioff noted that this is particularly relevant as businesses look to adopt AI. In many cases, companies need to get their data cleaned up and organized in such a way that it can be fed into and utilized by AI applications. Data is the foundation of any AI application. Salesforce sees Informatica strengthening Data Cloud and its overall strategy on AI agents. Benioff called them complementary. “This is a great price for a great company. It’s got great multiples. It’s accretive. It’s non-dilutive [to existing shareholders]. It’s coming together in an incredible way. This is a moment where Informatica is more important to our customers than ever before because of AI,” Benioff said on the call. Benioff and finance chief Washington both stressed that Salesforce was disciplined in evaluating the acquisition — notable, given that one of the reasons that multiple activist investors targeted Salesforce beginning in late 2022 was concerns about its aggressive and expensive approach to M & A. Washington was asked by an analyst why Salesforce only expects the transaction to boost adjusted operating margins, EPS and free cash flow in the second year following its closing. That is expected to happen early in calendar 2026, meaning the benefits will show up in calendar 2027. “The framework that we’ve talked about when we look at deals, we assume: Can we get it accretive within two years, right? So, that’s kind of our goal. Our desire is always to under promise and over deliver,” she said. “I think with our playbook that we have in place, we’re going to go fast as possible. We’re really focused on accelerating integration. So, we’ll see how that works out.” Complete guidance breakdown As mentioned, Salesforce’s second-quarter outlook came in better than expected, with the weaker U.S. dollar is now acting as a tailwind for its results. Here’s a closer look at its Q2 guidance compared with Wall Street’s expectations (GAAP stands for Generally Accepted Accounting Principles): Revenue in the range of $10.11 billion to $10.16 billion, which even at the low end exceeded the FactSet consensus of $10.02 billion. That would translate to year-over-year revenue growth of 8% to 9% on a GAAP basis, ahead of the 7.4% growth rate implied by the revenue estimate. On a constant currency basis, which excludes foreign exchange fluctuations, second-quarter revenue is projected to rise 7% to 8%, which would be more in line with expectations. Adjusted EPS in the rage of $2.76 to $2.78 a share, beating the $2.74 estimate, according to FactSet. Current remaining performance obligation (cRPO) growth of roughly 10% on a GAAP basis, or 9% on a constant-currency basis. The FactSet consensus called for 10% cRPO growth, though it’s unclear that estimate is GAAP or currency neutral. For the full year, Salesforce upped its revenue forecast to $41 billion to $41.3 billion, compared with its initial guidance of $40.5 billion to $40.9 billion. The new range implies 8% to 9% growth, up by a percentage point on the high and low ends. Subscription and support revenue growth , in particular, is still seen rising roughly 9% year over year on a constant currency basis. Adjusted EPS is now projected to be $11.27 to $11.33, up from its prior range of $11.09 to $11.17. Operating margin is still projected to be 21.6% on a GAAP basis and 34% on an adjusted basis. Operating cash flow also was unchanged at approximately 10% to 11% growth. (Jim Cramer’s Charitable Trust is long CRM. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.