Salesforce beats on earnings. But the stock slumps anyway as its AI story gets shakier

Salesforce posted a clean beat for Q2, with revenue rising 10% to top $10 billion and the company’s favored metric for near-term demand zooming 11% to $29.4 billion. Not too shabby, you might think—and you’d be right.

But underneath the print, there’s a bigger tension. The software-as-a-service company can boast of 10 straight quarters of margin expansion, plus real AI traction. But AI remains just a tiny fraction of the overall business, not a meaningful contributor to growth, while the company is leaning harder into capital returns.

That means it’s still not delivering the scorching growth story that Wall Street demands of tech stocks, so shares fell almost 6% ahead of Thursday’s bell.

AI no longer hypothetical, but not yet meaningful

Salesforce’s core business remains its subscription software empire: Sales, Service, Marketing, Integration, and Platform clouds that together generate billions every quarter. Those products are entrenched, sticky, and highly profitable, but their growth has slowed to high-single digits. For instance, Marketing & Commerce grew 3% in constant currency last quarter, while Sales and Service grew 8%.

The bright spot was Platform & Other, which includes Data Cloud and AI, climbing 16%. In other words, AI is the sizzle, while the steak remains the legacy business, which isn’t accelerating.

That explains the seeming paradox in Salesforce’s numbers: Data Cloud and Agentforce annual recurring revenue surged 120% year over year to $1.2 billion, yet consolidated growth held steady at 10%. That’s because $1.2 billion is still just about a tiny fraction of Salesforce’s overall $41 billion run rate. (And this as the company's layoffs continue.)

Margins, meanwhile, appear elevated already at an eye-watering 34%. So while AI is clearly paying off in a way that validates Salesforce’s positioning, it isn’t yet large enough to seriously move the needle on growth.

Guiding to the glide path

Salesforce’s guidance may be another red flag, at least according to Wall Street. For the third quarter, the company expects revenue to slow to 8-9% growth, down from the 10% it just posted. Full-year revenue guidance ticked up only slightly, and management even trimmed GAAP margin expectations, if only by a tiny bit.

Investors may see such moves as the company guiding to a glide path rather than the reacceleration old-time bulls have been waiting (and waiting) for. Salesforce’s position becomes all the tougher when you remember that megacaps like Microsoft are seeing stronger double-digit growth off far larger bases.

In other words, AI is absolutely paying off for the market leaders you’d expect, but in Salesforce’s case, the payoff looks more like validation than acceleration — thus far, anyway.