Salesforce reported $11.345 billion of revenue for the July quarter, up 10.8% year over year and above the top of its own guide. GAAP diluted earnings per share were $4.29, up 118.9%. Non-GAAP diluted EPS was $5.90 against a $3.27 consensus. Current remaining performance obligation — the forward book the stock actually trades on — accelerated to $33.5 billion, up 14%, a point ahead of guidance. The shares closed at $205.62 and traded near $232 after hours, up about 13%.
Now the other number. Income from operations was $2,331 million. A year ago it was $2,332 million. On the line that measures whether the software business got more profitable, Salesforce's best-ever quarter was one million dollars worse than the same quarter a year ago.
Everything between those two facts happened below the operating line, and it is worth walking through, because two of the three causes will not repeat.
The headline numbers
| Metric | Q2 FY27 | Q2 FY26 | YoY |
|---|---|---|---|
| Revenue | $11.345B | $10.236B | +10.8% |
| — Subscription and support | $10.820B | $9.690B | +11.7% |
| — Revenue ex-Informatica | $10.889B | $10.236B | +6.4% |
| Gross margin | 76.65% | 78.10% | −1.45 pts |
| Income from operations | $2.331B | $2.332B | −0.04% |
| GAAP operating margin | 20.5% | 22.8% | −2.3 pts |
| Non-GAAP operating margin | 34.1% | 34.3% | −0.2 pts |
| Gains on strategic investments | $2.613B | $0.006B | — |
| Interest expense | $(0.473)B | $(0.067)B | ×7.1 |
| Net income | $3.526B | $1.887B | +86.9% |
| Diluted EPS — GAAP | $4.29 | $1.96 | +118.9% |
| Diluted EPS — non-GAAP | $5.90 | $2.91 | +102.7% |
| Diluted shares | 821M | 962M | −14.7% |
| Free cash flow | $1.098B | $0.605B | +81.5% |
| cRPO | $33.5B | $29.4B | +14% |
Where $4.29 came from
Start with the investment book. Salesforce holds $11.3 billion of strategic investments, up from $7.6 billion in January, and it marks them through the income statement every quarter. This quarter that line contributed $2,613 million of pre-tax gains, against $6 million a year ago. It is 57% of pre-tax income.
At the quarter's own 22.5% effective tax rate, that gain is worth roughly $2.47 of the $4.29. Strip it and the rest of the business earned about $1.82 a share, against $1.95 on the same treatment a year ago — a decline. That calculation is ours; the release does not publish a per-share effect for the gain, and does not disclose the tax rate actually applied to it.
The non-GAAP number does not fix this. Salesforce's non-GAAP adjustments remove stock-based compensation, purchased-intangible amortisation and restructuring. They do not remove investment gains. The $5.90 carries the same $2.5-ish of mark-to-market that the $4.29 does; on the company's projected 20.5% non-GAAP tax rate, non-GAAP EPS excluding the gain is about $3.37 against that $3.27 consensus. A beat, but a two-and-a-half percent one rather than an eighty percent one.
Then the denominator. Diluted shares fell from 962 million to 821 million, down 14.7%, on a $25 billion accelerated share repurchase whose average price so far is $176. In the first six months of the fiscal year Salesforce spent $27.3 billion buying its own stock and raised $24.8 billion of debt to do it. Net income rose 86.9%; earnings per share rose 118.9%. The 32-point difference is the buyback.
That debt is now visible on the cost line: interest expense went from $67 million to $473 million, and noncurrent debt from $10.4 billion in January to $39.3 billion. Total equity fell from $59.1 billion to $38.4 billion, because treasury stock went from $32.2 billion to $55.0 billion. This is a company that has substantially re-levered itself in six months, and it happened faster than most models will have caught.
The 11% is a 6%
Salesforce closed Informatica during the year, and it discloses the contribution: $456 million of the quarter's revenue, and $440 million of the subscription line. Take it out and revenue grew 6.4%, subscription 7.1%.
That is not a criticism — acquired revenue is revenue, and the company is explicit about the number rather than burying it. But the guidance is explicit too: the FY2027 raise of $200 million ($300 million in constant currency) breaks down as $100 million organic, $200 million from the pending Contentful and Fin acquisitions, and a $100 million FX headwind. Two-thirds of the raise is deals that have not closed yet.
The organic case rests on a re-acceleration in the second half that the company insists is arithmetic rather than hope. President and COO Miguel Milano, on the call: "Definitely, we are committed to the H2 revenue re-acceleration. That's already math. Q3 is math. Q4 is nearly math." The evidence he offers is net new annual order value growth outpacing total order value growth through the first half, plus attrition near a record low. Neither is a number the company publishes as a level, so both have to be taken on trust until the revenue line shows them.
What did improve
cRPO is the one forward measure that genuinely got better: $33.5 billion, up 14% year over year and in constant currency, a point ahead of the guide, and an acceleration from 13% last quarter and 10% a year ago. Salesforce guided the same ~14% again for the October quarter, and pointedly excluded any contribution from Contentful and Fin — so the guide is organic.
Total remaining performance obligation of $66.3 billion grew 11%, slower than cRPO, which means the book got shorter at the margin even as management said contract lengths improved. Unearned revenue grew 13.5% year over year. Billings, which Salesforce does not print, come to $9.769 billion on the standard derivation of revenue plus the change in unearned revenue — up 8.6%, and slower than either revenue or cRPO.
Margins held on the non-GAAP measure — 34.1%, versus 34.3% — while GAAP operating margin fell 2.3 points to 20.5%. The wedge between the two is now 14.2 points: $904 million of stock compensation, $522 million of purchased-intangible amortisation, $115 million of restructuring and acquisition costs. It is widening as deals land, and the full-year guidance says so: GAAP operating margin was cut to 20.1% while non-GAAP was held at 34.3%.
The call was an argument, not a report
Marc Benioff spent the prepared remarks answering a thesis rather than presenting a quarter. The thesis is that frontier models make application software redundant — he calls it the SaaSpocalypse, and he went through it item by item using the quarter's own results: seats grew, attrition sat near a record low, premium-edition bookings more than doubled sequentially, agentic calls into Salesforce applications rose sixfold, and the nine of the top ten AI companies that use Salesforce increased their spend 435%.
The affirmative case is Claudeforce, a joint product with Anthropic announced on CNBC minutes before the call began. Dario Amodei then appeared on the earnings call itself — a frontier-lab chief executive on an enterprise-software results call is new — to describe the combination as "1 + 1 = 3". General availability is promised for September at Dreamforce, and it is gated behind Salesforce's premium editions, which is the monetisation mechanism: Milano said only 5% of knowledge workers on sales and service have upgraded to those editions, at a 60–80% price premium.
On capital, Benioff was unusually direct about why he bought so much stock:
Take the value of Slack. […] Then take the value of our Anthropic stock. That has been like half our value. Forget our cash flow or our customer base. That is why I said, "Robin, go try to buy as much back, as much Salesforce stock as you can." I think we got a lot of stock at a good price.
At $176 average against a $205.62 close, he has been right so far. It is also a candid statement that management thought the market was valuing the operating business at close to nothing — which is a strange thing to be vindicated on by a quarter in which the operating business earned exactly what it earned a year ago.
What to watch
- The October GAAP EPS guide of $1.81–1.83. Against $4.29 just delivered, the company's own guidance is the clearest possible statement that the headline is not the run rate. It assumes no investment gains, because gains cannot be forecast.
- Whether the second-half re-acceleration shows up in revenue. Organic growth is 6.4% today. The FY2027 guide needs it higher, and $200 million of the raise depends on two acquisitions closing.
- Interest expense. $473 million in a quarter is $1.9 billion annualised against $39.3 billion of debt. The ASR settles in October; after that the buyback stops flattering EPS and the interest stays.
- The Agentforce ARR definition. It was widened this quarter to include Slackbot and Headless 360. ">$1.5 billion, up over 240%" is not measuring what it measured last quarter, and a metric that changes shape while it grows is a metric to watch rather than to trust.
- Whether Claudeforce sells the premium upgrade. The whole AI monetisation argument now routes through edition upgrades. The 5% penetration figure is the one to check in three months.
What we learned
- Operating income was flat to the dollar. $2,331 million against $2,332 million, while revenue grew 10.8% and GAAP EPS grew 118.9%. GAAP operating margin fell 2.3 points to 20.5%; non-GAAP held at 34.1%.
- $2.6 billion of investment gains sit inside both headline EPS figures. Non-GAAP strips stock compensation and amortisation, not mark-to-market. Ex-gains, non-GAAP EPS is roughly $3.37 against a $3.27 consensus rather than $5.90 — a 3% beat, not an 80% one. That adjustment is ours.
- The share count did the rest. Diluted shares fell 14.7% to 821 million after $27.3 billion of buybacks in six months, funded with $24.8 billion of new debt. Interest expense went $67M → $473M; noncurrent debt $10.4B → $39.3B; equity $59.1B → $38.4B.
- The 11% growth rate is 6.4% organic. Informatica contributed $456 million, and two-thirds of the raised full-year guide comes from acquisitions that have not closed.
- cRPO is the number that genuinely improved: $33.5 billion, +14%, a point ahead of the guide and an acceleration from 13% — and it is the reason the stock rose 13% after hours despite everything above.
Salesforce (NYSE: CRM) reported its fiscal second quarter — the three months ended 31 July 2026 — after the US close on 26 August 2026. Revenue was $11.345B (+10.8% year over year), GAAP diluted EPS $4.29 and non-GAAP diluted EPS $5.90. Quotations are from the earnings call held the same afternoon, 26 August 2026. Gross margin, operating margin, the effective tax rate, revenue excluding Informatica, derived billings, and the per-share effect of the strategic-investment gain — including the ex-gain EPS figures — are ours, computed from the reported figures; every other number is the company's. Shares closed at $205.62 on 26 August, and traded near $232.32 after hours, up about 13%. The full figure set for the quarter is on the Salesforce Q2 FY2027 earnings page, and the passages quoted here sit alongside the rest of the call on the earnings call page.
