Salesforce sinks after missing revenue consensus for Q4

Salesforce (CRM) stock has receded gently enough on Thursday that if you didn’t check the headlines, you might not be aware that they delivered a decent fourth-quarter result in Wednesday’s post-market.

The creator of the leading customer relationship management software in the US, Salesforce handily beat Wall Street’s consensus on earnings but missed the revenue consensus by a hair.

The Dow Jones has gained 0.8% at the time of writing due to advances by 3M (MMM) and UnitedHealth Group (UNH) despite Nvidia (NVDA) drifting 3% lower following its own solid earnings release.

It’s a lucky reprieve for the market overall since the leading stock of the current era, Nvidia, failed to impress the market. Traders are so far ignoring US President Donald Trump’s announcement of a doubling of tariffs on China and confirmation of 25% tariffs going into effect on Canada and Mexico next Tuesday.

The American Association of Individual Investors said on Tuesday that its latest weekly survey saw the bearish cohort surge from 40.5% the previous week to 60.6%. Bearish investors are those who expect the market to be lower six months from now.

Salesforce earnings news

Salesforce earned $2.78 in adjusted earnings per share (EPS), which was 17 cents above the consensus among analysts. Revenue of $9.99 billion came in $42  million below consensus but rose nearly 8% from a year earlier.

Once known for beating earnings estimates like clockwork, Salesforce has missed either the earnings estimate or the sales estimate in three out of the last four quarters.

The central culprit for the sales miss was somewhat lower revenue recognition from Salesforce’s new Agentforce AI product, which helps businesses build their own digital AI customer service agents.

"The monetization of Agentforce is still in the early stages of playing out, and we believe that the company is taking a prudent approach to scaling the Agentforce that will pay off over the long term with the AI Revolution now entering the software phase," wrote Dan Ives of Wedbush Securities.

Including the 200 Agentforce deals announced in the previous earnings call, Salesforce now has 3,000 paying Agentforce contracts on the books. There are another 2,000 deals that have been signed under trial, non-paying contracts that could offer further revenue growth at a later date.

Another sore point was the sales guidance for the full year. CEO Marc Benioff said that his team was expecting between $40.5 billion and $40.9 billion in fiscal 2026 revenue, which came in well below Wall Street’s $41.5 billion consensus.

Bank of America Securities lowered its price target from $440 to $400 and called it the newest GARP stock, which stands for “growth at a reasonable price”.

Salesforce stock forecast

With certain analysts like Bank of America Securities lowering its longer-term trajectory on Salesforce's share price, it probably seemed like a good time to take profits off the table. As the survey by the American Association of Individual Investors shows, the majority of traders are getting cold feet.

Part of that is Trump's drumbeat toward multiple trade wars and the other is subtly climbing inflation that could forestall the Federal Reserve (Fed) from cutting interest rates this year. Friday, however, will deliver further news on the inflation front with January's Personal Consumption Expenditures (PCE) report, and many are expecting the news on that front to be bad to worse.

As it happens, the daily chart below shows that CRM stock is already well beyond the safety of the 100-day Simple Moving Average (SMA). The 200-day SMA may be the next rest stop near $290.

If bearishness takes over the market, expect CRM to be part of a deep sell-off that pushes the stock back to the resistance-turned-support window ranging from $225 to $242. Otherwise, a break above the 100-day SMA, now near $123.50, will bring the bulls back in force.

CRM daily stock chart