Verdict: Mixed
Key finding: Two quarters after the Feb 26 bear critique of Salesforce guidance, all three of its claims held. Growth ex-Informatica slowed to ~6.4% in Q2 FY27, GAAP operating income was flat Y/Y ($2,331M vs $2,332M) on +10.8% revenue, and FY27 GAAP operating margin guidance was cut from 20.9% to 20.1% while non-GAAP stayed at 34.3%. The stock still rose, on things outside operations: a $2.7B Anthropic mark-up that made up most of the "80% EPS beat", a $25B debt-funded buyback (diluted shares -14.7% Y/Y), the Claudeforce launch, and a software-sector rebound.
Scorecard
| Ticker (last Q) | Rev last Q ($M) | Rev YoY last Q | Rev YoY prior Q | Gross margin (trend) | Op margin (GAAP) | EPS last Q vs yr ago | P/S | Mkt cap | 1-mo price % |
|---|---|---|---|---|---|---|---|---|---|
| CRM (Q2 FY27, Jul) | 11,345 | +10.8% (~+6.4% ex-Informatica) | +13.3% | 76.7% (76.9%, flat) | 20.6% | $4.29 vs $1.96 (incl. $2.6B investment gains) | 4.5x | $199B | +6.5% |
| NOW (Q3, Sep) | 4,106 | +20.5% | +24.0% | 70.5% (77.3% yr ago, falling) | 9.4% | $0.27 vs $0.48 | 10.1x | $155B | +14.2% |
| WDAY (Q2 FY27, Jul) | 2,651 | +12.9% | +13.5% | 75.4% (76.2%) | 12.0% | $2.57 vs $0.84 | 4.9x | $49B | +8.4% |
| ADBE (Q3 FY26, Aug) | 6,760 | +12.9% | +12.7% | 88.1% (89.2%) | 34.8% | $4.62 vs $4.18 | 3.7x | $97B | +8.1% |
| HUBS (Q2, Jun) | 912 | +19.8% | +23.4% | 82.4% (83.5%) | 4.8% | $0.86 vs -$0.06 | 3.7x | $13B | +22.7% |
CRM is the growth laggard of the group and mid-pack on price: with Informatica removed, its ~6.4% growth is about half the slowest peer reported rate (ADBE and WDAY +12.9%; peer rates are as reported, acquisitions not stripped out), while 4.5x sales sits between ADBE/HUBS (3.7x) and WDAY (4.9x). CRM is also the only name whose EPS jump came mostly from non-operating gains. GAAP margin pressure is not unique to CRM: NOW operating margin fell from 16.8% to 9.4% Y/Y.
Move
- Feb 26, 2026 (day after the Q4 FY26 report, when the critique was posted): close $199.47.
- Slid to a $150.12 close on Jun 22 (-24.7% from Feb 26).
- Q2 FY27 report, Aug 26 after the close: Aug 27 gapped +11.9% (open $230.05 vs $205.62) and closed +22.6% at $252.05 on 55.5M shares.
- Peak close $264.43 on Sep 3 (+28.6% vs the pre-earnings close; intraday high $268.27).
- Since then a $220-268 range: lows $221.18 (Sep 28) and $220.29 (Oct 8), both held above the Aug 27 gap open. Last close $242.11 (Oct 28): -8.4% from the peak, 50-day $237.0, 200-day $198.5.
- Since Feb 26: CRM +21.4% vs IGV +35.5%, NOW +37.4%, WDAY +46.9%, ADBE -3.6%, HUBS -7.3%, SPY +12.0%.
Catalyst
The bear case (Wasteland Capital, @ecommerceshares on X, Feb 26, 2026), read off the FY27 guidance table: (1) organic growth excluding FX and Informatica is only 6-7%; (2) non-GAAP margins exclude SBC and acquisition costs while counting the acquired revenue; (3) operating margin shows no ability to scale. Here is how the two quarters since compare.
Growth with Informatica removed (arithmetic on company-reported revenue and Informatica contribution; Salesforce does not publish an organic rate):
| Quarter | Revenue ($M) | Reported YoY | Informatica ($M) | YoY ex-Informatica | FX effect (reported vs CC) |
|---|---|---|---|---|---|
| Q4 FY26 (Jan) | 11,201 | +12.1% | 399 | +8.1% | +2 pts, so ~6% in CC |
| Q1 FY27 (Apr) | 11,133 | +13.3% | 444 | +8.7% | +1 pt, so ~7.7% in CC |
| Q2 FY27 (Jul) | 11,345 | +10.8% | 456 | +6.4% | ~0 (11% both) |
| Q3 FY27 guide | 11,420-11,500 | +11-12% | "slightly above 4 pts" | at most ~7.5% at the midpoint, before Contentful/Fin | — |
The three claims:
| Claim (Feb 26) | What the next two quarters showed | Held? |
|---|---|---|
| Organic growth only 6-7% | ~7.7% CC in Q1, ~6.4% in Q2; Q3 guide midpoint at most ~7.5%. The Aug full-year raise was $100M organic vs $200M from the pending Contentful/Fin deals (offset by -$100M FX). The Oct 2025 Investor Day target was >10% organic growth through FY30 | Yes |
| Excluding SBC and M&A costs flatters the margin | Q2 SBC $906M (+14.2% vs revenue +10.8%; H1 +9.7% vs revenue +12.0%); amortization of acquired intangibles $522M vs $380M; restructuring $94M vs $4M. The GAAP vs non-GAAP margin gap in FY27 guidance widened from 13.4 to 14.2 pts | Yes |
| No operating leverage | Q2 GAAP operating income $2,331M vs $2,332M a year ago; H1 GAAP operating margin 20.8% vs 21.3%; FY27 GAAP margin guide 20.9% to 20.1% | Yes |
What moved the stock (none of it is operating leverage):
- Anthropic mark-up. Q2 net gains on strategic investments were $2,613M, including $2.7B unrealized on Anthropic. The $5.90 non-GAAP EPS includes these gains. Removing them at the 20.5% non-GAAP tax rate gives ~$3.37 vs $3.27 consensus, so the "80% beat" was about 3% on operations (my arithmetic from the release and 10-Q). Anthropic was ~45% of the $11.3B strategic portfolio at Jul 31, which is about $5.1B (arithmetic). At Dreamforce, Benioff said the stake could become "tens of billions" and would likely be sold to pay down the buyback debt (a CEO claim, with no timing given).
- $25B accelerated buyback funded with $25B of new notes (March 2026). Diluted shares went from 962M to 821M Y/Y. Debt rose from $14.4B (Jan 31) to $39.3B (Jul 31). Q2 interest expense was $473M vs $67M, and in May the FY27 operating/free cash flow growth guide was cut from 9-10% to 4-5% for the interest. The banks delivered 103M shares up front at $198.34. The CFO expects a ~$182 average and a share-count reduction of over 14%. Final settlement was expected in October and had not been announced by Oct 28.
- Claudeforce (Salesforce data and actions inside Claude) was unveiled with the Q2 report, and the Aug 27 rally accelerated on it.
- What is real: cRPO grew +14% in Q1 and Q2, with Q3 guided ~14% excluding acquisitions. The Q4 FY26 cRPO figure included 4 pts of Informatica; Q1 and Q2 do not state the Informatica share. Agentforce ARR is over $1.5B, but the definition was broadened in Q2 (now includes Slackbot and Headless 360), so it is not comparable to earlier periods. TTM free cash flow is $15.2B (13.1x the $199B market cap, or 17.3x after the $3.7B TTM SBC).
Sector
- Software rebounded hard after the spring low: IGV +35.5% since Feb 26 and +9.3% since Aug 26, with CRM +17.7% over that span. Over the last month IGV is +6.1% and CRM +6.5%.
- Dreamforce (Sep 16-18) kept the FY30 revenue target at $63B (above the $61.4B Bloomberg consensus). Stifel and Guggenheim raised price targets to $300; UBS stayed Neutral at $260. The stock closed about 2% lower on Sep 18.
- After the Q2 print, UBS, Citi, Morgan Stanley and Wells Fargo kept Neutral or equivalent ratings (MarketBeat).
Risks
- Q3 FY27 report (~Dec 1-2, date not yet confirmed): management has promised organic re-acceleration in H2 FY27. The guide midpoint implies at most ~7.5% ex-Informatica, and that is before the Contentful/Fin contribution comes out.
- Earnings quality: non-GAAP EPS now moves with private Anthropic marks, which can reverse. The timing and price of any Anthropic sale are unknown.
- Leverage: $39.3B debt vs $11.4B cash and marketable securities, interest of ~$470M per quarter, and free cash flow growth guided at only 4-5%.
- More M&A: Contentful (price not disclosed; $1-1.5B reported) and Fin closed in September, adding to the amortization and SBC lines the bear case flagged.
- SBC: TTM $3.7B, which is 24% of TTM free cash flow.
- Gap fill: the pre-earnings close was $205.62.
Judgement
Mixed. The bear case on the operating business has been right for two straight quarters: organic growth ~6-7%, GAAP operating income flat, the GAAP margin guide cut, and more acquisitions. The Aug 27 +22.6% day was not paid for by operations. The EPS beat was an Anthropic mark-up, and per-share numbers are lifted by a buyback bought with debt. The bear case did miss the balance-sheet side. The buyback was done around $182-198 vs $242 now, the Anthropic stake is a sellable asset that can repay debt, cRPO is holding +14%, and at 4.5x sales and ~13x free cash flow the stock is not priced like a grower. Even so, a re-rating needs real organic acceleration, and the Q3 guide does not show it yet. Since the critique the stock has trailed its own sector (+21% vs IGV +35%).
Sources
- https://www.salesforce.com/news/press-releases/2026/08/26/fy27-q2-earnings/
- https://www.sec.gov/Archives/edgar/data/0001108524/000110852426000190/crm-20260731.htm
- https://salesforce.com/news/press-releases/2026/05/27/fy27-q1-earnings
- https://www.quantisnow.com/insight/salesforce-delivers-record-fourth-quarter-fiscal-2026-results-6412998
- https://fortune.com/2026/05/27/salesforce-turbocharges-25-billion-stock-buying-spree-with-debt-cuts-cash-flow-guidance-in-half/
- https://www.wlrk.com/transaction/salesforce-in-its-25-billion-notes-offering-6-billion-term-loan-facility-and-25-billion-accelerated-share-repurchase/
- https://www.itiger.com/news/2662840920
- https://www.nasdaq.com/articles/salesforce-stock-just-soared-thank-anthropic
- https://stockanalysis.com/stocks/crm/transcripts/740446-dreamforce-2026-investor-analyst-session/
- https://www.tipranks.com/news/salesforce-stock-crm-falls-despite-analyst-price-target-raises-as-dreamforce-2026-ends-why-are-analysts-bullish
- https://seekingalpha.com/news/4504825-salesforce-surges-following-robust-growth-targets-from-investor-day
- https://cmswire.com/digital-experience/salesforce-acquires-contentful-to-power-agentforce-content/
- https://www.marketbeat.com/stocks/NYSE/CRM/social-media