Salesforce Beats Earnings But Stock Plunges: Is AI Eating Enterprise Software?

$11.2 billion in revenue and $3.81 earnings per share. Salesforce delivered a quarter that beat every expectation on Wednesday evening. Yet shares tumbled 4.5% in after-hours trading. The paradox reveals a deeper anxiety haunting enterprise software: is AI the industry's savior or its destroyer?

The Numbers Tell One Story

Salesforce's fourth-quarter results (ended January 31) painted a picture of robust growth. Revenue climbed 12% year-over-year to $11.2 billion, topping estimates of $11.18 billion. Adjusted earnings per share of $3.81 crushed consensus by 77 cents—a 37% jump from last year.

The star performer was Agentforce, the company's AI platform that has closed over 29,000 deals since launch and now represents an $800 million annual recurring revenue business. Blue-chip clients like Amazon, Ford, AT&T, and Pfizer are betting their digital transformation on Salesforce's AI agents.

CEOs from SharkNinja and Wyndham Hotels even appeared on the earnings call to tout Agentforce's impact—improving customer service and driving "millions of dollars" in additional revenue while reducing labor costs.

The Market Tells Another

Yet investors sent shares down to around $183, dangerously close to the 52-week low of $178.16. The stock has cratered 27% year-to-date, making it one of the worst performers in the S&P 500.

The devil lurked in the details. While current remaining performance obligation (cRPO)—a key growth metric—rose 13%, the recently acquired Informatica contributed 4 percentage points. Strip that out, and organic Salesforce growth was just 9%—disappointing investors who wanted double digits.

This organic growth rate became a lightning rod for the bear case: can Salesforce grow its shiny new AI business while maintaining its legacy CRM empire? The jury's still out.

The Margin Squeeze Reality

GAAP operating margins compressed year-over-year and missed Street expectations, even as non-GAAP margins expanded. This divergence matters more than usual as investors scrutinize "real" profitability amid the AI spending boom.

Salesforce isn't alone in this margin pressure. The entire enterprise software sector faces a similar squeeze as companies pour resources into AI development while traditional software pricing power erodes.

A $50 Billion Vote of Confidence

Management's response was emphatic: a new $50 billion share buyback program, representing roughly 27% of the company's $180 billion market cap. Combined with the $4 billion repurchased in Q4, it signals leadership believes the stock is dramatically undervalued.

CEO Marc Benioff has grown increasingly frustrated with the market's failure to appreciate Agentforce's potential. The platform is transforming how enterprises operate, yet the stock continues to languish.

The Terminal Value Question

The real challenge isn't near-term performance—it's how investors value long-term prospects in an AI-disrupted world. If AI agents can automate tasks that traditional CRM software merely organized, what's the terminal value of that software?

This isn't just Salesforce's problem. Workday faced similar post-earnings volatility this week before recovering. The entire enterprise software sector grapples with the same existential question: will AI enhance their products or replace them entirely?

Looking Ahead: Cautious Optimism

For fiscal 2027, Salesforce guided revenue of $45.8-46.2 billion (10-11% constant currency growth) and adjusted EPS of $13.11-13.19. The guidance brackets consensus but lacks the upside surprise investors craved.

GAAP operating margin guidance of 20.9% fell short of the 22.0% consensus, reinforcing concerns about profitability in the AI transition.