Is Salesforce Inc (CRM) Undervalued After Q2 Earnings Beat? GF Score: 86/100
Revenue and Earnings Beat Expectations as Demand for AI Solutions Grows
GuruFocus News
08/26/2026 16:10
Salesforce Inc CRM released its 8-K filing on August 26, 2026, announcing impressive financial results for its second quarter of fiscal 2027, which ended on July 31, 2026. As a leader in enterprise cloud computing solutions, Salesforce offers Customer Relationship Management (CRM) technology that connects companies to their customers through its Customer 360 platform.
In the past quarter, Salesforce delivered strong performance metrics amidst growing competition and macroeconomic challenges. The results underscore the increasing demand for its AI-focused solutions, which are vital for businesses seeking to enhance customer engagement and operational efficiency.
Performance Summary and Challenges
Salesforce achieved a remarkable total revenue of $11.3 billion, reflecting an 11% year-over-year increase, and pushing the company ahead of the estimated revenue of $11,320.25 million. However, the firm faced challenges such as fluctuating currency rates and the global economic environment, which could hinder growth in the coming quarters. Notably, current remaining performance obligations (cRPO) grew 14% year-over-year, further highlighting the company’s robust pipeline.
Despite these challenges, the significant demand for the company’s AI and data products indicates a strengthening foundation. As the company commented, “AI is delivering value across every layer of our platform,” suggesting that their innovations are resonating with the market.
Financial Highlights and Importance
Salesforce’s notable financial achievements include:
| Metric | Q2 FY27 Result | Y/Y Growth |
|---|---|---|
| Revenue | $11.3 billion | 11% |
| Subscription and Support Revenue | $10.8 billion | 12% |
| GAAP Operating Margin | 20.5% | N/A |
| Non-GAAP Operating Margin | 34.1% | N/A |
| GAAP Diluted EPS | $4.29 | 119% |
| Non-GAAP Diluted EPS | $5.90 | 103% |
| Free Cash Flow | $1.1 billion | 81% |
These financial metrics are critical for valuing Salesforce, particularly as scalability and margin efficiency drastically affect the software industry’s competitive landscape. The impressive growth in both GAAP and non-GAAP earnings per share showcases a significant operational improvement over the past year.
Salesforce’s GAAP diluted net income per share rose significantly to $4.29 from $1.96 last year, although it is worth noting that it was slightly above the analyst estimate of $1.81. The non-GAAP equivalent of $5.90 exceeded the estimate of $1.81 by a significant margin, reflecting the profitable direction the firm is headed in.
Salesforce’s operating cash flow also surged to $1.3 billion, demonstrating a 71% increase from the prior year. As the company invests heavily in AI innovations, such cash flow improvements will facilitate ongoing research and development, consolidating its market-leading position.
In addition to these accomplishments, management emphasized their optimism regarding fiscal guidance, raising revenue expectations for fiscal 2027 to a range of $46.1 billion to $46.4 billion, up from $46 billion, showing confidence moving forward. The targeted growth comes amidst high expectations for performance in the latter half of the fiscal year and several upcoming acquisitions.
GuruFocus Valuation Check
Based on GuruFocus’s valuation metrics, Salesforce Inc CRM is rated with a GF Score of 86/100, indicating a strong overall assessment. The current price of $205.62 presents the stock as 38.4% undervalued compared to a GF Value of $333.76. This substantial gap suggests potential upside for value investors, as the market may not fully appreciate the company’s strong fundamentals and growth trajectory.
The company holds a Financial Strength rank of 5/10 and a Profitability Rank of 9/10, demonstrating solid financial stability. With a Growth Rank of 10/10, Salesforce showcases promising revenue growth prospects, bolstered by an increasing demand for AI-enhanced services. However, the Predictability metric (5 stars) reflects consistency in financial performance, essential for investor confidence.
Of note, insider trading over the past year featured net selling activity of $31.9 million, which may warrant caution among investors. Nonetheless, the insider buying of $27.4 million highlights some confidence in the company’s future. For those seeking a deep dive into Salesforce’s operational data and prospects, please visit the Salesforce Inc stock page on GuruFocus.
Explore the complete 8-K earnings release (here) from Salesforce Inc for further details.
GuruFocus context: GuruFocus’ GF Value™ estimates fair value near $333.76 (38.4% undervalued); its GF Score™ is 86/100; 21 gurus currently hold the stock, with 9 adding and 11 trimming positions in recent quarters — guru 13F data Simply Wall St and Morningstar don’t have. See the full Salesforce IncCRM research.
This stock alert was generated using automated technology and GuruFocus financial data to provide readers with timely and accurate market reporting. This content was reviewed by GuruFocus editorial team prior to publication. Please send any questions or comments about this story to [email protected].
