By Adam Levine and Callum Keown

Salesforce stock rose ahead of the open of trading Thursday after the company reported mixed third-quarter earnings.

Salesforce posted late Wednesday adjusted earnings per share were $3.25, well ahead of Wall Street's consensus estimate of $2.86, up from $2.41 last year. Revenue for the quarter reached $10.26 billion, just shy of expectations for $10.27 billion, and up 9% on the year.

Despite the small miss on third-quarter revenue, guidance for the fourth quarter and the full fiscal year was very strong.

Profitability soared in the third quarter as seen in the earnings beat and in the company's adjusted operating profit margin of 35.5%, ahead of expectations of 34.1%, and up from 33.1% last year.

Salesforce shares were up 1.9% in the premarket Thursday but have declined 29% in 2025 heading into regular trading.

"Overall the results are an incremental positive against largely negative investor sentiment, though we aren't convinced it is a turning point for the story," Citi analyst Tyler Radke said in a note Thursday. He has a Neutral rating on the stock with a $253 price target -- which is 6% upside to Wednesday's closing price of $238.72.

J.P. Morgan analyst Mark Murphy was more bullish and said Salesforce's "rare revenue miss" was overshadowed by strong bookings momentum. He has an Overweight rating on the stock with price target of $365.

"Salesforce has transformed into a highly profitable and cash-generative business, and we continue to see eventual upside from current levels as the company balances growth with profitability and FCF (free cash flow) generation while infusing Generative AI capabilities into its clouds," he said in a note Thursday.

Wedbush analyst Dan Ives said the software company's earnings were a "step in the right direction," but that there's still "a long way to go" as its Agentforce strategy -- AI agent offering -- builds momentum. He has an Outperform rating and $375 price target.

Salesforce had an unusually long stretch of high sales growth that extended from its founding in 1999 to 2022, never dipping below 20% growth in that period. But its industry-leading customer relationship management software has neared saturation, and annual sales growth began slowing the following year, down to 8.7% in fiscal year 2025, which ended in January. Thus far in fiscal year 2026, sales are also up 8.7% from the year before.

But in the process, Salesforce has become a more profitable company, with a free cash flow margin of 33% in 2025, versus 20% in 2023. It has used some of that cash for dividends and buybacks, reducing the share count by 4.9% in the process. It's a classic case of growth turning into value.

At the same time, Salesforce is caught up in the maelstrom of artificial intelligence, and how it could disrupt its business. Like many competitors, it's turning to selling generative AI software products to its customer base. Chief among these are agents -- software that can use AI models to accomplish a complex series of tasks from a simple prompt. Salesforce is selling its customers on the promise of being able to automate large portions of their workflows, especially the tedious tasks.

As we've seen elsewhere, like at Microsoft, this has been tough sledding with enterprise customers who are being very cautious about implementing AI throughout their organizations.

Salesforce has been more transparent than most about its progress here, revealing actual dollar amounts in contracts. At the end of the third quarter, it had booked annual recurring revenue of $540 million from agentic AI products, up by $100 million from just three months before. While this is only about 1.2% of the company's projected revenue for the next 12 months, it provides a starting point to help understand how Salesforce's AI initiatives are faring.

The company believes that AI can get it back to double-digit percentage sales growth again.

Write to Adam Levine at adam.levine@barrons.com

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December 04, 2025 07:34 ET (12:34 GMT)

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