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Why did Salesforce stock drop after beating earnings estimates? Investors may have wanted something the company couldn’t deliver.
Shares of Salesforce (CRM -4.70%) took a significant hit on Thursday. Following the company’s release of second-quarter results, the stock fell as much as 8.5% in the morning session. By 11:30 a.m. ET today, Salesforce had recovered to a 5.7% overnight price drop.
Image source: Getty Images.
Another earnings beat for Salesforce, but wait — there’s more
Wall Street’s average analyst had expected second-quarter earnings to rise about 8.6% year over year, landing near $2.78 per share. Revenue was targeted at roughly $10.1 billion, reflecting an 8.7% increase. The enterprise software giant exceeded the consensus analyst targets across the board, posting earnings of $2.91 per share on sales of $10.2 billion.
Looking ahead, management set full-year guidance targets just above the current analyst projections. So it was a beat-and-raise performance, but the stock still took a tumble.
Why investors wanted more from Salesforce’s AI moves
Salesforce investors were probably looking for stronger guidance targets. After all, CEO Marc Benioff recently said that his company is removing roughly half of its customer support staff in favor of artificial intelligence (AI) tools. Specifically, deploying agentic AI systems to support human customer service specialists can deliver top-notch support outcomes at a faster pace and lower cost.
But this report highlights how the company isn’t exactly laying off that redundant support staff. Instead, the workers are being redeployed into sales and marketing operations, where the human touch makes a bigger difference these days. So, if you were hoping for a large cost-cutting effect from Salesforce’s agentic AI moves, the reported financials told a different story.
About the Author
Anders Bylund is a contributing Motley Fool media and technology analyst covering semiconductors, cloud computing, internet infrastructure, quantum computing, and streaming media. Previously, Anders was a systems administrator for Nielsen Technology and CSX, gaining hands-on experience with enterprise-class systems. He also was a freelance writer for Ars Technica, TIME, USA Today, CNN, WIRED, and AOL’s Daily Finance. He holds a bachelor’s degree in English and a master’s degree in library and information sciences from Florida State University.
Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Salesforce. The Motley Fool has a disclosure policy.
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