TradingKey - Salesforce (CRM) dispelled the long-standing pessimism hanging over the software sector with a better-than-expected earnings report.

On the first trading day following the earnings report, Salesforce shares surged 22.6%, recording their best single-day performance in nearly six years and significantly narrowing their year-to-date decline. The rally also spread across the software sector, with ServiceNow (NOW), Adobe (ADBE), and Fortinet (FTNT), among several other software stocks, advancing in tandem.

The market is once again betting that while generative AI may change the way traditional software operates, it will not necessarily replace SaaS companies entirely.

Guggenheim analyst John DiFucci believes that this earnings report largely relieved market concerns over a "SaaS apocalypse." While AI will indeed force software companies to adjust their products and pricing models, Salesforce's latest data on bookings, customer retention, and AI products indicates that traditional software companies still have the opportunity to be key participants in this wave of technological transformation.

Why Salesforce Stock Surged 23%?

For the second quarter of fiscal 2027 ended July 31, Salesforce's revenue grew 11% year-over-year to $11.345 billion, slightly beating market expectations of $11.33 billion. Subscription and support revenue rose 12% to $10.82 billion, while current remaining performance obligation (cRPO) reached $33.5 billion, up 14% on a constant currency basis, reflecting continued expansion in contract revenue to be recognized over the coming year.

Salesforce recorded its strongest net new annual order value growth in four years, with customer attrition near historical lows, and management expects organic growth to reaccelerate in the second half of the year. Accordingly, the company raised its fiscal 2027 revenue guidance to between $46.1 billion and $46.4 billion, with approximately $100 million of the incremental gain coming from organic growth and the remainder primarily driven by pending acquisitions. Official earnings reports from Salesforce showed that the company also maintained its full-year adjusted operating margin target of 34.3%.

Meanwhile, Salesforce's expanded partnership with Anthropic served as another key factor shifting market sentiment in this earnings release. The "Claudeforce" initiative launched by both companies integrates Claude models into Salesforce's customer data, business processes, and enterprise applications, enabling users to deploy AI agents within their existing CRM systems.

This partnership sends a message that large language model developers and incumbent software companies do not necessarily have to compete. Anthropic possesses model capabilities, but Salesforce holds enterprise data, customer relationships, business permissions, and compliance frameworks; collaborating may prove more efficient than competing independently for enterprise customers.

Cantor Fitzgerald analyst Matthew VanVliet believes that large model developers are choosing to partner with incumbent software vendors rather than replacing them directly.

Evercore ISI analyst Kirk Materne also pointed out that Claudeforce demonstrates AI models and enterprise "systems of record" can co-evolve, undermining the pessimistic view that AI will render legacy software obsolete.

Salesforce Stock Price Prediction: Can CRM Hit $300?

Source: TradingView

On the weekly chart, CRM surged following its earnings report, most recently trading at $252.05. It has broken above its long-term downtrend line and reclaimed the 60-week moving average at $215.61, with trading volume expanding concurrently to approximately 90.08 million shares, indicating strong capital support behind the breakout. However, the 20-week moving average at $181.52 remains below the 60-week moving average, and the medium-term moving averages have not yet formed a bullish alignment, suggesting the stock is currently in the early stages of a reversal.

The stock is currently testing the 0.5 Fibonacci retracement level at $256.58. If it closes above this level on the weekly chart with elevated volume, the next target could be $282.79; a further breakout past $283 would bring the psychological threshold of $300 into focus, followed by the 0.786 retracement level at $320.

The RSI has climbed to 69.09, well above its signal line of 45.87, reflecting strong upward momentum. However, it is also approaching the overbought zone of 70, indicating that the stock may experience near-term consolidation at high levels.

Find out more