Summary
Salesforce reported fiscal 2027 second-quarter revenue of $11.34 billion, up 10.8% from the prior-year quarter, with year-to-date revenue of $22.48 billion, up 12.0%. The profit lines look far stronger than the top line. Net income of $3.53 billion rose 86.9%, and diluted EPS of $4.29 rose 118.9% from $1.96 a year earlier. Much of that swing came from mark-to-market gains on the strategic investment portfolio, which management excludes from non-GAAP results and says it cannot forecast. Operating income of $2.33 billion was flat versus the prior-year quarter, and operating margin fell to 20.5% from 22.8%.
Gross profit of $8.70 billion rose 8.8%, slower than revenue, and gross margin slipped 1.4 percentage points to 76.7%. Costs are the issue. Salesforce attributes the pressure to higher service delivery spend, hosting and generative AI costs, and amortization of intangibles picked up in acquisitions. Stock-based compensation, purchased intangible amortization, and restructuring and acquisition costs explain the gap between the 20.5% GAAP operating margin and the 34.1% non-GAAP figure. Non-GAAP diluted EPS of $5.90 was up 103%.
Demand metrics held up. Current remaining performance obligation reached $33.5 billion, up 14% year over year and in constant currency. Total remaining performance obligation of $66.30 billion rose 10.7%, although that balance has drifted lower from the levels reported earlier in the fiscal year. Deferred revenue, current portion, was $18.79 billion, up 13.5%. Agentforce and Data 360 annual recurring revenue approached $3.9 billion, up more than 210%, with Agentforce alone above $1.5 billion, up more than 240%. Agentic work units hit 3.2 billion in the quarter, up 97% sequentially, and Data 360 ingested 104 trillion records, up 355%. Subscription and support revenue grew 12%, while professional services revenue declined 4% on softer demand for large transformation projects. Attrition was about eight percent.
Cash flow was choppy by period. Operating cash flow of $1.27 billion in the quarter was up 71.5%, and $7.97 billion year to date was up 10.4%. Free cash flow of $1.1 billion for the quarter was up 81%. Capital expenditures of $171 million rose 26.7%. Salesforce paid $364 million of dividends and is running a $25 billion accelerated share repurchase expected to settle in October 2026. Cash, cash equivalents and marketable securities totaled $11.4 billion, against $33.3 billion of senior notes and a $6.0 billion term loan.
Guidance moved higher. For the third quarter of fiscal 2027, revenue is guided to $11.42 billion to $11.5 billion, up 11% to 12% and in constant currency, with cRPO growth of approximately 14%. Full-year fiscal 2027 revenue guidance was raised to $46.1 billion to $46.4 billion, up 11% to 12% and 11% in constant currency. The $200 million increase reflects $100 million of organic growth, $200 million from the pending Contentful and Fin acquisitions, and a $100 million foreign exchange headwind. Full-year GAAP operating margin is guided to 20.1% and non-GAAP to 34.3%, with operating cash flow and free cash flow growth of approximately 4% to 5%. Contentful, at roughly $1.5 billion, and Fin, at roughly $3.6 billion, are both expected to close in the third quarter. The risk list is familiar and long: acquisition integration, competition, the pace of AI adoption, currency swings, data privacy and security, and the volatility of the investment portfolio marks that flattered this quarter's earnings.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2027 | Q1 FY2027 | QoQ | Q2 FY2026 | YoY |
|---|---|---|---|---|---|
| Revenue | $11.35B | $11.13B | +1.9% | $10.24B | +10.8% |
| Gross profit | $8.70B | $8.56B | +1.6% | $7.99B | +8.8% |
| Gross margin | 76.7% | 76.9% | -0.3 pp | 78.1% | -1.4 pp |
| Research & development | $1.69B | $1.63B | +3.7% | $1.48B | +13.9% |
| Sales & marketing | $3.86B | $3.77B | +2.4% | $3.44B | +12.1% |
| General & administrative | $725.0M | $740.0M | -2.0% | $734.0M | -1.2% |
| Total operating expenses | $6.37B | $6.22B | +2.4% | $5.66B | +12.4% |
| Operating income (loss) | $2.33B | $2.35B | -0.7% | $2.33B | -0.0% |
| Operating margin | 20.6% | 21.1% | -0.5 pp | 22.8% | -2.2 pp |
| Net income (loss) | $3.53B | $2.11B | +67.3% | $1.89B | +86.9% |
| Net margin | 31.1% | 18.9% | +12.1 pp | 18.4% | +12.6 pp |
| Diluted EPS | $4.29 | $2.42 | +$1.87 | $1.96 | +$2.33 |
Risks
The filing names AI-native companies and emerging startups that use generative AI and large language models as the core of their architecture and may bypass traditional business process workflows or displace established user interfaces. Salesforce also warns competitors may incorporate AI into their offerings more efficiently and achieve faster adoption, which could negatively impact future sales.
Agentforce and Data 360 are sold through a consumption-based model and the filing states the markets and monetization strategies for these offerings remain relatively new and uncertain, with limited experience determining optimal pricing. If customer usage is below expected levels, the company may not adequately forecast renewals or optimize pricing, which could prevent it from meeting revenue targets.
Interest expense rose to $473 million in the quarter and $790 million for the six months ended July 31, 2026, versus $67 million and $135 million a year earlier, driven by the March 2026 debt offering. Principal due on outstanding debt obligations was $39.5 billion as of July 31, 2026, up from $14.5 billion as of January 31, 2026, and the company expects interest expense to increase throughout fiscal 2027.
The filing expands on threat actors using AI, including autonomous agents and frontier models, to discover and weaponize zero-day vulnerabilities and automate multi-stage attack chains, which it says may significantly compress the time available to remediate. It also notes AI adoption within products and internal systems introduces novel security and data governance risks.
Salesforce relies on third-party models, datasets and cloud infrastructure for certain AI applications, and states access to frontier AI models may be subject to sudden suspension or restriction by providers or governments due to safety concerns, regulatory mandates or shifting cloud platform priorities. Loss of such access could significantly increase expenses and disrupt service delivery.
Gains on strategic investments were $2.6 billion in the quarter and $3.2 billion for the six months ended July 31, 2026, including $2.7 billion and $3.0 billion respectively related to the investment in Anthropic, partly offset by impairments on privately held investments of $285 million and $404 million. The filing warns that concentration of portfolio value in emerging technology and AI sectors increases exposure to volatility and possible partial or total loss of invested capital.
The filing states the company has experienced challenges with significant competition in talent recruitment and retention, particularly for engineers with experience in AI, and that restructuring actions including workforce reductions could negatively impact its ability to attract, integrate, retain and motivate key employees.
Larger enterprise and government customers demand pricing and packaging flexibility and complex configuration, driving up costs and time to close and potentially delaying revenue recognition until technical or implementation requirements are met. The filing also notes pricing and packaging strategies for Agentforce and Data 360 may not be widely accepted.
Attrition was approximately eight percent as of July 31, 2026, excluding Slack self-service, Informatica and current year acquisitions. The filing states the shift toward consumption-based pricing and AI-driven consumption models makes it more difficult to optimize pricing, predict attrition rates and accurately forecast revenue.
Gross margin fell to 76.7 percent in the quarter from 78.1 percent a year earlier, and operating margin fell to 20.5 percent from 22.8 percent, as cost of revenues rose to 23 percent of total revenues from 22 percent on higher service delivery spend including hosting services and generative AI technologies. The company intends to continue investing in AI, agentic and cloud services, which may cause cost of revenues as a percentage of revenues to fluctuate.
The company completed the Informatica, Regrello and Qualified acquisitions and has agreed to acquire Contentful for approximately $1.5 billion and Intercom for approximately $3.6 billion, both expected to close in the third quarter of fiscal 2027 subject to regulatory approvals. The filing cites risks including failure to achieve expected benefits, unknown security vulnerabilities in acquired technology, and antitrust or regulatory conditions on integration.
The filing highlights the EU AI Act, the EU Digital Services Act and the EU Data Act as imposing additional rules on the development, deployment or use of AI-enabled features, and notes increasing scrutiny of safe harbors for hosted content. It also flags uncertainty over whether the EU-U.S. Data Privacy Framework will withstand future legal challenges, which could restrict cross-border data transfers.
The filing states increasing constraints on data center power, land and water availability could limit the ability to expand data center capacity, increase operational costs or require modified infrastructure plans, and that government-imposed data residency requirements may constrain resiliency options and increase costs.
Professional services and other revenues decreased 4 percent in the quarter and 1 percent for the six months ended July 31, 2026, primarily due to less demand for larger, multi-year transformation engagements, which the filing says may continue in the near term.
SaaS KPIs
All quarters →Free cash flow
Non-GAAP operating margin
Billings and other
Current remaining performance obligation (cRPO)
Remaining performance obligation (RPO)
Agentforce and Data 360 ARR
Agentforce ARR
Summary, forecast, risks and KPIs are extracted from Salesforce, Inc.'s SEC filings for Q2 FY2027 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.