How Should Investors Play Salesforce Stock After Q3 Earnings Beat?

Salesforce, Inc. CRM recently posted decent third-quarter fiscal 2026 results, helping its shares rise 9.3% since the Dec. 3 release. CRM’s third-quarter non-GAAP earnings per share (EPS) surpassed the Zacks Consensus Estimate, while revenues matched the same. The top and bottom lines also registered growth on a year-over-year basis.Salesforce reported third-quarter fiscal 2026 non-GAAP earnings of $3.25 per share, which beat the Zacks Consensus Estimate by 14.04%. The bottom line improved 34.9% year over year. Salesforce’s fiscal third-quarter revenues of $10.3 billion came in line with the consensus mark and increased 10% year over year.The growth in the top and bottom lines reflected the benefits of CRM’s go-to-market strategy and sustained focus on customer success. The initiatives to integrate generative artificial intelligence (AI) into its offerings also boosted demand for Salesforce’s solutions during the reported quarter.Following Salesforce’s third-quarter results, investors might be wondering about their next move.Salesforce Inc. Price, Consensus and EPS Surprise Salesforce Inc. price-consensus-eps-surprise-chart | Salesforce Inc. QuoteEnterprise Software: A Key Catalyst for CRM’s GrowthSalesforce has long held the top position in the customer relationship management market, according to Gartner. The company’s vision now goes beyond customer management, and it is building a broader ecosystem focused on artificial intelligence (AI), data and collaboration. Acquisitions like Waii, Bluebirds, Informatica and Slack show Salesforce’s push to evolve into a more complete enterprise platform.AI is now central to Salesforce’s growth story. Since the 2023 rollout of Einstein GPT, Salesforce has been embedding generative AI across its offerings to help companies automate processes, improve decision-making and strengthen customer relationships.Its latest innovation, Agentforce, is gaining momentum. Combined with Data Cloud, these AI-driven offerings brought in $1.4 billion in recurring revenues in the third quarter of fiscal 2026, representing a 114% year-over-year increase. Agentforce alone generated $540 million in recurring revenues, up 330% year over year. More than 50% of Agentforce deals came from existing clients, showing Salesforce’s success in cross-selling AI features to its user base.Another tailwind is rising global spending on generative AI. Gartner estimates that worldwide generative AI spending will hit $644 billion in 2025, implying a 76.4% year-over-year increase.Enterprise software, a key segment for Salesforce, is expected to grow even faster, with a projected increase of 93.9% to $37.16 billion. Even if economic conditions slow down spending in the short term, digital transformation remains a top priority for businesses, ensuring steady demand for Salesforce’s solutions.Salesforce’s Valuation Looks AttractiveSalesforce stock looks attractive from a valuation perspective. CRM is currently trading at a forward 12-month price-to-earnings (P/E) multiple of 20.98, significantly lower than the Zacks Computer – Software industry’s average of 29.55.Salesforce Forward 12-Month P/E RatioImage Source: Zacks Investment ResearchCompared to major competitors like Microsoft Corporation MSFT, Oracle Corporation ORCL and SAP SE SAP, Salesforce’s stock is cheaper on a P/E basis. At present, Microsoft, Oracle and SAP trade at P/E multiples of 29.29, 29.83 and 31.72, respectively.Slowing Sales Growth Hurts Salesforce StockSalesforce’s biggest challenge right now is slowing sales growth. For years, it has delivered strong double-digit revenue increases. However, that pace has now cooled to single digits. In the first nine months of fiscal 2026, revenues rose just 8.7% year over year.This slowdown reflects cautious enterprise spending amid economic uncertainty and geopolitical pressures. Analysts’ revenue projections indicate no significant improvements in the years ahead. The Zacks Consensus Estimate for both fiscal 2026 and 2027 indicates that revenues will grow around 10% year over year.The impact is also visible in profit forecasts. Salesforce’s EPS is now expected to witness a CAGR of 15% over the next five years, which is a big drop from the 27.8% CAGR it posted over the previous five years. Fiscal 2026 and 2027 EPS forecasts indicate a year-over-year improvement of 14.2% and 10.5%.This changing growth profile shows how businesses are adjusting their IT budgets. Instead of large digital transformation projects, many are opting for smaller, lower-risk investments. For Salesforce, this means it has to adapt its strategy to stay competitive and relevant.Slower growth has also hurt investor sentiment. Salesforce shares have plunged 21.9% year to date, while the industry has risen 11.5%. The stock is also lagging behind key rivals like Microsoft, Oracle and SAP. Year to date, shares of Oracle and Microsoft have risen 34.3% and 16.6%, respectively. Meanwhile, SAP stock has fallen 0.9% over the same time frame.Salesforce YTD Price Return PerformanceImage Source: Zacks Investment ResearchConclusion: Hold Salesforce Stock for NowSalesforce’s slowing growth is real and has weighed on its stock price. However, its leadership in the customer relationship management software space, focus on AI, strategic acquisitions and reasonable valuations provide reasons to hold the stock for long-term gains.Salesforce carries a Zacks Rank #3 (Hold) at present. 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(CRM): Free Stock Analysis Report SAP SE (SAP): Free Stock Analysis Report Oracle Corporation (ORCL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks