Salesforce To Report Mixed Q2; Investors Remain Skeptical About H2 Acceleration

Investor sentiment remains mixed heading into Salesforce Inc‘s (NYSE:CRM) earnings report, due on Wednesday, Aug. 26, according to BTIG analyst Allan Verkhovski.

The Salesforce Analyst: Verkhovski maintained a Buy rating and price target of $255.

The Salesforce Thesis: Commentary from competitors and channel checks suggest the company could report mixed results for the quarter, he added.

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Microsoft Corp (NASDAQ:MSFT) indicated that Dynamics continued to witness moderation and longer sales cycles during the quarter, while HubSpot Inc (NYSE:HUBS) highlighted a softer demand environment "marked by greater budget sensitivity," he noted.

The analyst stated that their channel checks signal:

• Some green shoots across core growth drivers, including Sales, Service, and Slack
• Growing number of customers putting Agentforce into production
• AI budgets remain the clear priority for many enterprises
• Tableau continued to "face challenges"
• Headless 360 added several new capabilities last week that "turn each cloud into reusable enterprise capabilities," although channel checks indicate limited customer interest.

Some customers are considering moving away from Salesforce, which is not surprising "given the evolving capabilities with AI," although this does not appear to be a broad-based trend, Verkhovski noted.

"On the positive side, there are signs of renewed customer interest in core Sales Cloud deployments, and CRM closed a large deal with a utilities company that moved to an unlimited credit license," he further wrote.

FQ2 Estimates: The analyst noted these estimates:

• Growth in cRPO (current remaining performance obligation) in constant currency terms of at least 13.5%, versus consensus of 13.0%.
• Total revenue growth of 10.0%, in-line with guidance.
• For the third quarter, management could guide to total revenue growth of about 11% and cRPO growth of about 13%.

"Most investors remain skeptical that CRM can deliver acceleration in the 2H, which is exactly what makes this earnings report particularly interesting," he added.

CRM Price Action: Shares of Salesforce had risen by 1.04% to $211.35 at the time of publication on Monday.