Salesforce Stock (CRM) Underperforming Into Earnings, Moving Off Lows

Salesforce's stock (NYSE: CRM) has found a little support in recent days, adding 3.49% in the past week of trading, yet the trend remains one of huge underperformance YTD ahead of today's earnings. The cloud-based software giant heads into its third-quarter fiscal year 2026 earnings trading at $235 per share, 29% lower than where it began the year.

The current price sits significantly below both the 50-day simple moving average (SMA) of $260.71 and the 200-day SMA of $293.50, a bearish technical sign for the stock.

Earnings per share is expected to come in at $2.86 on the quarter, a healthy jump on the $2.41 in the same quarter last year. Revenue growth is forecast at 8.77% to the mid-point of estimates, for a figure of $10.27billion on the quarter.

Looking out to next year, and the forecast growth for FY27 is for 8.95% in sales, with the earnings per share moving up to $11.38 (vs $10.2 forecast for FY26).

Recent events have undoubtedly contributed to the pressure on Salesforce's stock. The Q2 fiscal 2026 earnings report, released on September 3, revealed adjusted EPS that beat analyst expectations ($2.91 vs. $2.78), and revenue also slightly exceeded projections ($10.2 billion vs. $10.14 billion). However, the Q3 revenue forecast of $10.24 billion to $10.29 billion fell short of analyst estimates, triggering a nearly 5% stock decline the following day. This miss has lingered in investors’ minds, dampening enthusiasm.

Adding to the complexity, CEO Marc Benioff's decision to reduce the customer service workforce by approximately 4,000 roles due to the integration of AI-powered support agents has raised eyebrows. While the move aims to improve efficiency and reduce costs, it has also sparked debate about the ethical implications of AI-driven job displacement. The market is keenly watching to see whether these layoffs translate into tangible cost savings reflected in this quarter’s results.

On a more positive note, Salesforce unveiled ambitious long-term revenue goals during its Investor Day presentation at Dreamforce in October. The company aims to surpass $60 billion in revenue by fiscal year 2030, implying an organic compounded annual growth rate exceeding 10% from FY26 to FY30. The “50 by FY30” Profitable Growth Framework, targeting a combined constant currency subscription and support growth rate plus non-GAAP operating margin of 50, also signals a commitment to sustainable and profitable expansion. These announcements initially boosted the stock, demonstrating investor confidence in Salesforce's long-term vision.

Salesforce's aggressive push into AI, including the commercial launch of Agentforce AI and the expanded partnership with OpenAI, is a key strategic focus. However, the company has faced challenges in immediately monetizing these AI investments, contributing to the cautious revenue forecasts. The market is waiting to see how effectively Salesforce can translate its AI initiatives into concrete revenue streams.

Despite significantly underperforming the S&P 500 Index, analysts maintain a “Moderate Buy” consensus rating with a mean price target of $327.81, representing a significant premium to the current price. The lowest price target by analysts sits at $221.00, and a high of $430.00. Mizuho Securities, for example, reaffirmed a “Buy” rating with a $350 price target in October 2025. These ratings suggest that analysts believe the stock is undervalued and has the potential for substantial upside.

In a collaborative effort to mitigate the risks associated with AI implementation, Salesforce partnered with Adecco to launch r.Potential. This joint venture aims to guide businesses in integrating AI into their operations, reducing the likelihood of an “AI bubble.” The platform has already garnered interest from 300 large clients, indicating a strong demand for solutions that effectively embed AI into core business processes.

Recent data on Thanksgiving online sales, which showed a 6% year-over-year increase, reaching $8.6 billion, also paints a positive picture for Salesforce's e-commerce clients. This robust consumer engagement during the holiday season could potentially benefit Salesforce's financial performance.

The prevailing analyst sentiment suggests potential for a rebound, a closer examination reveals a more nuanced picture. Are analysts truly accounting for the speed at which new entrants are muscling into the CRM and AI spaces? Perhaps the “Moderate Buy” ratings are more reflective of inertia and historical performance rather than a clear-eyed assessment of the evolving competitive landscape.

While Salesforce has a strong foothold, its sheer size could become a liability, making it difficult to adapt quickly to disruptive technologies and shifting customer preferences. The layoffs, while potentially boosting short-term profits, could erode the company's innovative edge and damage employee morale. Is Salesforce truly positioned to deliver on its ambitious long-term goals, or is it facing a gradual decline in market share?