It has taken time, but we have hit rock bottom and the stage is set for a strong recovery. The SaaS apocalypse is not happening; Salesforce continues to gain ground, and its first-quarter earnings results reveal that the virtuous cycle of AI is gaining momentum.
The virtuous cycle, driven by the upward impact of AI spending, is reflected in NVIDIA’s results across the data center and services supply chain. When companies spend money on AI, they generate revenue and increase demand for AI.
New spending equals new demand in a still endless cycle. Because we are in the early phases of launching AI, we can expect this cycle to sustain Salesforce’s long-term growth.
Mixed response overshadows bullish outlook for CRM
Analysts had a mixed response to the first-quarter results, with numerous negative price target revisions offset by reaffirmed and target increases. The net result, however, was bullish, as MarketBeat’s 39 analysts have a 72% buy bias and the revisions are clustered around the consensus. While some are pushing the lower end, many are on the higher end, averaging $240 just below the broader 12-month consensus price target. The consensus assumes a nearly 50% upside from the critical support target, which coincidentally aligns with analysts’ lower targets. The consensus on new targets implies a 35% increase and a five-month maximum.
The stock’s technical price and institutional trends also align with the critical support target around $160, which reflects the high set in 2019 before the COVID-19 pandemic. Since then, price action has been volatile, driven by stimulus spending and accelerated digitalization, but the stock has continued to show support at this level, as it did in late May. Support is seen in the candles and weekly price indicators, which reflect the bears losing control and the bulls regaining it.
Institutional trends reveal high ownership and aggressive accumulation. The group owns more than 80% of the shares, has bought back for 10 consecutive quarters and has stepped up activity as the share price has fallen. Bullish activity persisted into early Q2 2026 and will likely continue the trend as the year progresses. The stock is trading at a ridiculously low price, 12 times current year earnings, and growth is accelerating under the influence of AI. Assuming the forecasts are correct, the company can grow 200% in the short term and then double again over time, given the right catalysts.
Salesforce posts tepid results, but against a high bar
Salesforce’s first-quarter results and guidance were lukewarm relative to analyst forecasts, but the bar was high and the results were strong. The company’s net revenue of $11.31 billion increased 13.2% year over year, accelerating both quarter-over-quarter and year-over-year, the strongest growth in three. The results were supported by Agentforce, the agent platform, which reported more than 200% annual recurring revenue growth. Consumption, a critical factor, was also strong, increasing more than 110% sequentially, and Data 360 managed a 136% increase in registrations.
Margin news was also strong. The company reported earnings across the board, with adjusted earnings rising 50% year-over-year (year-over-year) to $3.88, beating consensus by 75 cents. More importantly, guidance was also strong, with the company forecasting another quarter of strength. Growth is expected to slow to just over 10%, but forecasts are likely cautious. The most critical detail is that earnings are expected to beat expectations by a wide margin, and it may also be a cautious guide.
Among the factors that highlight the strength of the company are its financial position and its capacity to return capital. The company entered into a $25 billion accelerated repurchase agreement, which is largely complete. The impact was a 10% year-over-year decline in diluted share count, with the expectation of continued aggressive capital returns. Dividends are also part of the equation, yielding nearly 1% at the end of May, with annual increases in the distribution expected. As it stands, the balance sheet remains one of strength, with abundant cash and low leverage, enabling strategy execution and results delivery.
Analysts hoping to “see more” in Salesforce’s results may miss the point. The company’s main catalysts are AI integration, margin improvement and return on capital, and it delivered on all three. With this at play, CRM’s share price may struggle to rise, but that’s unlikely. The likely outcome is that the upcoming results will convert more detractors into supporters, which will help firm up market sentiment. Until then, this stock may sink near its current lows, but is not expected to fall below them.
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