In the quarter ended July 31, Salesforce (CRM) revenue rose about $1.1 billion from a year earlier, while GAAP operating income barely moved. Will AI kill it? I think the bigger worry right now is this: revenue is up, but each share may not end up with any more.
This video looks at:
- Where the extra revenue went: it was offset by extra costs and expenses, and the research hasn't untangled why;
- Why net income jumped: an investment gain of about $2.6 billion, almost all of it on paper;
- Why earnings per share look even better: this March it borrowed $25 billion for a buyback, so there are fewer shares, and interest that quarter was several times what it was a year earlier;
- Four tallies still unsettled: acquisition returns, interest, employee stock, and AI budgets;
- The other side: this is just one quarter, the year-ago base was high, and cash and contracts are still holding up;
- The one thing to watch from the next earnings report on: leaving out acquired revenue, can growth turn into cash and then reach each share?
This video is based on compiled research. Financial data run through the quarter ended July 31, 2026. It does not judge whether the stock is cheap or expensive and offers no trading conclusion.
Research commentary only, not investment advice. The author may hold the stocks mentioned in this video.
#Salesforce #CRM #USStocks #Earnings #AI
Original company documents, linked at the source for your reference.
0:00In one quarter, revenue rose $1.1 billion from a year earlier, and the core business made not a cent more. Will AI kill Salesforce?
0:09I think the bigger worry right now is this: revenue is up, but each share may not end up with any more.
0:16Known in Chinese as Saifushi, it sells companies the systems that run sales and customer service, and once they're in, they're hard to move away from.
0:23In the quarter through the end of July, where did the extra revenue go? It was offset by extra costs and expenses. Why? The research hasn't untangled that: revenue and costs from acquisitions are mixed in, and items like restructuring charges may play a part.
0:38Net income did jump. That's because the books picked up a $2.6 billion investment gain. Almost all of it is a paper number that hasn't turned into cash. It's like a shop that earned no more from its business while the house its owner holds went up in value. The house is worth more, but until it's sold, that money doesn't reach the till.
0:57I'll keep taking apart numbers like these. Now look at earnings per share, which look even better. This March it borrowed $25 billion to buy back its own stock. Think of a pie: cut it into fewer slices and each slice is naturally bigger. But there's an IOU under the plate: interest that quarter was several times what it was a year earlier.
1:18Roughly speaking, take out that paper gain and earnings per share look far less impressive. The share count really did fall, but whether the buyback was worth it depends on the final tally.
1:29And that's not all. In under two weeks, it announced plans to buy three companies.
1:35Before this becomes money for each share, four tallies are still unsettled. Acquisitions: will they earn their cost back? Interest: how much will it pay? Employee stock: how much does it really cost? New AI budgets: will they flow to platforms like Microsoft?
1:50Still, this worry hasn't been proven. This is just one quarter, and the year-ago quarter had the highest core profit margin of the past ten quarters. In the six months through the end of July, core profit still grew. Over a full year, the business brought in more than $15 billion in cash, though that's before employee stock and money spent on acquisitions. Signed contracts are growing too, also including acquisitions. The company says customers are already paying for its AI, but there's no independent data on whether it's profitable.
2:22Outside platforms could also become a sales channel for it. Spending first and earning later is a plausible story too.
2:28From the next earnings report on, watch one thing: leaving out acquired revenue, can growth turn into cash and then reach each share? If it does that for several quarters in a row, I worried too much. If it doesn't, the worry gets heavier.
2:43What do you think? Tell me in the comments. This video is research commentary only, not investment advice. The author may hold the stocks mentioned in this video. Follow me, and see you next time.
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