Software names ran higher this session, lifting the IGV software ETF. Salesforce (CRM) rose 20% on earnings. Palantir (PLTR) gained 4%, Adobe (ADBE) moved similarly, and Datadog (DDAG/DDOG) was up 6.7%. Intuit (INTU) lagged, down 0.8% after a mixed report earlier in the week.
Salesforce (CRM) numbers
Earnings per share came in at $5.90 versus $3.27 expected. Revenue was $11.35 billion, up 11% year over year, slightly above estimates. Net income was $3.53 billion, an 87% jump from a year ago. Salesforce credited a $2.6 billion gain on strategic investments tied to its stake in Anthropic. Alphabet (GOOGL) and Microsoft (MSFT) also reported gains in recent weeks from their Anthropic investments. Free cash flow spiked 81% to $1.1 billion, well above the $643.2 million estimate.
Guidance beat on both lines. Third quarter EPS is seen at $3.42 to $3.44, with revenue of $11.42 to $11.5 billion. Full year revenue is now guided to $46.1 to $46.4 billion, implying 11% growth at the midpoint, in line with expectations and a raise from the range given in May. New net annual recurring revenue growth was the strongest in four years.
Claude Force partnership
The bigger story is "Claude Force," an expanded strategic partnership with Anthropic. It embeds Salesforce customer data, workflows, and business logic into the Claude chatbot through a new plug-in for sales teams. The plug-in has 37 pre-built sales skills built jointly by both companies, covering meeting prep, deal health review, and pipeline management. Sellers can automate pipeline updates and take governed action without leaving Claude. It is now in a pilot group of customers, with open beta expected in September and more pre-built skills planned.
The tie-in goes beyond the plug-in. Claude is now the default model for Slack, powering Slackbot and a new team decision-making feature called Claude Tag. It is also available inside Agentforce. Salesforce says Claude Force offers "the best of both worlds" and that users will "really see AI transformation" when they use it. Management said none of the "dire predictions about the end of software" have applied to Salesforce products.
Analyst reaction
Price targets rose across the board. Shares were trading around $247 after the 20% move.
- Jefferies: raised to $300 from $250, buy rating; said investor concerns about a second-half reacceleration were soothed.
- Barclays: raised to $276 from $236, overweight.
- Wells Fargo: raised to $230 from $205, equal weight (below the current price).
- Citi: raised to $233 from $204, also below current price.
- Baird: raised to $275 from $225, outperform.
- Morgan Stanley: raised to $235 from $218, equal weight.
Firms below the current price could adjust again if the stock holds its gains. Anthropic is not yet public.
Trade view and market context
This is a strong bounce and comeback from the software selloff earlier in the year. Software as a service looks like it may have bottomed and could be turning the corner. Rather than chase a 20% move, one example trade is the October 230 put in Salesforce (CRM), priced around $10 to $11.50 in the morning before the stock rallied.
The deal points to a broader AI shift. The concern that data centers are only for talking to chatbots misses the point; hyperscalers will run many workloads beyond chatbots and tokenized model use. Thousands of companies like Salesforce could fold these models into their own offerings, which is an interesting inflection point for the AI trade.
Claude Force itself is a strategic partnership, not an AI agent. The wave of coming AI agents supports the bull case for cybersecurity and identity security names, seen in reactions to CrowdStrike (CRWD) and Okta (OKTA).
Markets remain in a rotation. Software and security names like Datadog and Palantir look strong, while larger hyperscalers lag, with Alphabet (GOOGL) roughly flat. Some traders fear a softening or lull in September, which tends to happen seasonally in midterm election years.
Interest rates are the most important factor, with oil prices closely tied to them. The best case is inflation cooling without the economy cooling, which is possible though many discount it. The 10-year yield matters a lot to growth companies; every time it climbs above 4.75%, debt at some growth companies comes under question. Some describe this as a "tech term premium" - the pressure is not only from bond vigilantes but is emerging in technology too.
