Salesforce Gears Up to Post Q1 Earnings: How to Play the Stock?

Salesforce CRM is scheduled to release first-quarter fiscal 2026 results on May 28.For the fiscal first quarter, the company expects total revenues to be between $9.71 billion and $9.76 billion (midpoint $9.735 billion). The top-line estimate is pegged at $9.74 billion, which indicates an increase of 6.6% from the year-ago quarter’s reported figure.CRM anticipates non-GAAP earnings per share to be in the band of $2.53-$2.55 for the first quarter. The consensus mark for non-GAAP earnings has remained unchanged at $2.54 per share over the past 60 days, which calls for a 4.1% increase from the year-ago quarter’s level.Image Source: Zacks Investment ResearchSalesforce’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average surprise being 4.4%.  (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)Salesforce Inc. Price and EPS Surprise Salesforce Inc. price-eps-surprise | Salesforce Inc. QuoteEarnings Whispers for SalesforceOur proven model predicts an earnings beat for Salesforce this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is exactly the case here.CRM’s Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($2.56 per share) and the Zacks Consensus Estimate ($2.54 per share), is +0.76%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.Salesforce’s Zacks Rank: CRM carries a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Factors Likely to Influence Salesforce’s Q1 ResultsSalesforce appears well-positioned to report strong first-quarter results, driven by its strategic focus on digital transformation and cloud solutions. With businesses globally undergoing digital overhauls, Salesforce's commitment to aligning its product offerings with customer needs is likely to have boosted its revenues for the quarter.The growing demand for generative AI-enabled cloud solutions has been a major catalyst for Salesforce. By embedding generative AI tools across its products, the company not only enhances customer engagement but also strengthens its competitive position in the customer relationship management space. This forward-thinking approach might have significantly contributed to its top-line growth during the to-be-reported quarter.Salesforce’s ability to deepen relationships with leading brands across industries and expand its reach in key geographic markets remains a cornerstone of its growth strategy. The company’s increasing footprint in the public sector is likely to have provided a further boost, unlocking new growth opportunities during the first quarter.The acquisitions of Spiff, Own and Zoomin have been pivotal in enhancing Salesforce's capabilities and diversifying its revenue base. These additions are likely to have driven higher subscription revenues, particularly across its core cloud services. Salesforce’s key cloud offerings, including Sales, Service, Platform & Other, Marketing & Commerce and Data, are expected to have delivered robust growth.Our first-quarter revenue estimates for Sales, Service, Platform & Other, Marketing & Commerce and Data cloud services are pegged at $2.14 billion, $2.34 billion, $1.84 billion, $1.35 billion and $1.54 billion, respectively. We expect revenues of approximately $9.21 billion and $518.8 million for the Subscription and Support segment and the Professional Services division, respectively.The ongoing cost restructuring initiative is likely to have boosted Salesforce’s profitability in the first quarter. The company’s fourth-quarter fiscal 2025 non-GAAP operating margin expanded 170 basis points to 33.1%, mainly driven by an improved gross margin and the benefits of cost restructuring initiatives, which include the trimming of the workforce and a reduction in office spaces.CRM’s Price Performance & ValuationOver the past year, Salesforce shares have risen 1.4%, underperforming the Zacks Computer – Software industry’s growth of 10.4%. Compared to its peers, CRM stock has also underperformed other enterprise software makers, including SAP SE SAP, Oracle ORCL and Microsoft MSFT. Over the past year, shares of SAP, Oracle and Microsoft have gained 53.1%, 26.7% and 6%, respectively.One-Year Price Return PerformanceImage Source: Zacks Investment ResearchNow, let’s look at the value Salesforce offers investors at the current levels. CRM stock is trading at a discount with a forward 12-month P/S of 6.48X compared with the industry’s 9.25X.Image Source: Zacks Investment ResearchCRM stock also trades at a discounted multiple compared with SAP, Oracle and Microsoft. At present, SAP, Oracle and Microsoft have P/S multiples of 8.38X, 6.77X and 10.87X, respectively.Investment Thesis for Salesforce StockSalesforce is the undisputed leader in the customer relationship management industry, consistently outpacing rivals like Microsoft, Oracle and SAP. Gartner’s annual rankings reaffirm its top position year after year. Its ability to maintain this dominance stems from its expansive product suite, seamless integrations and innovative approach to enterprise solutions.Strategic acquisitions have played a crucial role in strengthening its market position. The $27.7-billion acquisition of Slack in 2021 significantly enhanced its collaboration capabilities, making Salesforce a comprehensive enterprise software provider. More recently, the $1.9-billion acquisition of Own Company in 2024 bolstered its data protection and AI capabilities, a move that aligns with growing enterprise priorities around security and automation.Salesforce’s AI initiatives further cement its leadership. Since introducing Einstein GPT in March 2023, the company has expanded its AI-driven functionalities across its entire ecosystem. This technology enhances automation, streamlines workflows and improves customer interactions, giving Salesforce a significant advantage as AI adoption accelerates across industries.Additionally, Salesforce is positioned to benefit from the continued rise in worldwide IT spending. Gartner projects global IT spending to reach $5.61 trillion in 2025, implying a 9.8% year-over-year increase. Enterprise software spending is expected to grow even faster, rising 14.2% year over year. As digital transformation remains a top priority for businesses, Salesforce is well-positioned to capture a substantial share of these increasing budgets.Conclusion: Hold CRM Stock Ahead of Q1 ResultsThe company’s leadership in customer relationship management, aggressive AI expansion and increasing enterprise IT spending trends create a solid foundation for sustained growth. Its ability to deliver earnings growth despite ongoing macroeconomic uncertainties makes the stock worth holding.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microsoft Corporation (MSFT): Free Stock Analysis Report Salesforce Inc. (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