Salesforce Inc. (NYSE: CRM) shares fell sharply to levels not seen in the past year during Thursday’s trading session. This downward movement followed a series of earnings reports from key software industry players, namely Microsoft Corp. (NASDAQ: MSFT), SAP SE (NYSE: SAP), and ServiceNow Inc. (NYSE: NOW). The collective performance and guidance from these companies unsettled the broader software sector, especially among enterprise-focused vendors, highlighting concerns over cloud demand trajectories, the pace of deal activity, and the timeline for realizing returns from AI-related investments.
Microsoft’s earnings report signaled a deceleration in the growth rate of its Azure cloud services, prompting investors to reevaluate near-term cloud revenue prospects. SAP posted revenue figures that fell short of expectations in U.S. dollar terms despite outperforming on earnings, while simultaneously signaling a more pronounced slowdown in cloud backlog growth. This revelation was tied to a shift in deal composition towards longer-term, large transformation projects, which typically involve extended ramp-up periods and flexible contractual terms, thereby clouding short-term revenue visibility.
ServiceNow, after reporting strong beats in subscription growth and reaffirming robust directions for its recurring revenue, tempered market enthusiasm by forecasting a slowdown in subscription growth rates for 2026 compared to 2025. This moderation added to the sector’s cautious tone during trading, pulling broader enterprise software indices down along with Salesforce.
SAP’s Detailed Results and Implications
SAP’s financial disclosures served as a critical inflection point for investor sentiment. Although earnings beat consensus estimates, the notable miss in revenue figures attracted focus towards the quality and sustainability of demand rather than just profitability metrics. SAP’s CFO described a cloud backlog trend that has decelerated more sharply than expected despite reported robustness. The underlying cause was attributed to an evolving deal mix favoring larger, complex transformation engagements characterized by longer implementation cycles and adaptive contract terms. This dynamic can potentially obscure near-term revenue recognition across the enterprise software landscape.
ServiceNow’s Outlook and Sector Impact
ServiceNow’s quarterly results initially provided a positive surprise with subscription revenue growth exceeding forecasts. However, its cautionary stance on the expected subscription growth rate decrement in 2026—from approximately 20.5% in 2025 down to the 19.5%–20% range—prompted a reappraisal by investors, leading to a depressed share price. This forward-looking guidance fed into broader apprehensions about sustained cloud subscription acceleration within the sector.
Microsoft’s Cloud Performance and AI Spending
Microsoft’s earnings report, while evidencing strong overall revenue performance, introduced key concerns over cloud momentum and AI-related investment levels. Quarterly capital expenditures were notably elevated at $37.5 billion, intensifying scrutiny around the cost-to-revenue conversion of AI infrastructure spending. Azure revenue grew by 39% year-over-year, yet this fell short of some analyst expectations for growth velocity. The market’s reaction suggested investors sought more immediate evidence that rising AI infrastructure investments are translating into proportionate near-term revenue gains.
Specific Pressures on Salesforce
As a high-quality indicator within enterprise software, Salesforce is sensitive to signals indicating cloud growth moderation. Any deceleration raises concerns about the expansion of paying seats, prolongation of sales cycles, and tighter corporate IT budget conditions. Microsoft’s CFO Amy Hood highlighted that AI expenditures are dispersed across different components within the company’s AI ecosystem, including key products such as Microsoft 365 Copilot and GitHub Copilot, rather than being confined solely to Azure. For Salesforce, this mixed messaging highlights two critical points: ongoing uncertainty regarding the return on investment for AI initiatives industry-wide, and increased competitive pressures as Microsoft integrates AI tools more deeply into enterprise workflows.
Salesforce’s Technical and Valuation Landscape
Salesforce’s stock price has exhibited a pronounced bearish trend, currently trading approximately 13.7% below its 20-day simple moving average and 14.7% below its 100-day simple moving average. Over the past year, shares have decreased by approximately 40.43%, situating the stock closer to its 52-week nadir than its peak. The relative strength index (RSI) stands at a neutral 34.46, while the Moving Average Convergence Divergence (MACD) indicator remains below its signal line, emphasizing prevailing bearish momentum though with nuanced signals.
The nearest significant resistance level to monitor is identified at $251.00.
Business Model Overview
Salesforce specializes in enterprise cloud computing with a focus on customer relationship management (CRM). Its flagship platform, Customer 360, amalgamates customer data across multiple systems to enhance capabilities in sales, service, marketing, and commerce, facilitating more integrated customer interactions.
Financial Outlook and Valuation Metrics
Market participants are awaiting Salesforce’s upcoming earnings release scheduled for February 25, with analysts estimating earnings per share (EPS) of $2.69, a decrease from $2.78 year-over-year. Revenue projections stand at approximately $11.19 billion, up from $9.99 billion over the same period last year.
Despite a downward EPS revision, the stock maintains a price-to-earnings (P/E) ratio of about 30.4, indicating a premium valuation relative to historical averages.
Analyst Consensus and Target Prices
The prevailing analyst consensus rates the stock as a Buy, with an average price target near $325.04. Recent analyst actions include:
- Barclays upgrading their stance to Overweight and raising the price target to $338 as of January 12.
- RBC Capital maintaining a Sector Perform rating with a target elevation to $290 as of January 5.
- BTIG initiating coverage with a Buy recommendation and a target price of $335 on December 17, 2025.
The combination of a premium valuation, a modest 3% expected earnings decline, and strong price targets reflects the market’s view that Salesforce’s growth prospects largely justify its elevated multiple.
Current Market Performance
Salesforce shares experienced a 7.65% decline, trading at approximately $210.49 at the time of reporting, underscoring the immediate impact of broader sector concerns and earnings read-through.