Salesforce Earnings Preview: Google Deal in Focus as Stock Slides
Ahead of the earnings call this week, Salesforce (CRM) announced an expanded partnership with Alphabet (GOOGL), which will bring Gemini, Google's generative AI chatbot tool, to Agentforce. Agentforce is an autonomous platform that enables customers to help themselves with popular or simple queries. With Gemini, more complex queries can be handled as well.
Srini Tallapragada, Salesforce president and chief engineering and customer success officer, offered commentary in a recent press release: “Through our expanded partnership with Google Cloud and deep integrations at the platform, application, and infrastructure layer, we're giving customers choice in the applications and models they want to use ... Salesforce offers a complete enterprise-grade agentic AI platform that makes it easy to deploy new capabilities easily and realize business value fast. Google Cloud is a pioneer in enterprise agentic AI, offering some of the most powerful, capable models, agents, and AI development tools on the planet. Together we are creating the best place for businesses to scale with digital labor.”
Stock Performance and Earnings Expectations
An apparent win-win scenario for both parties doesn't hide the fact Salesforce failed to exceed earnings-per-share (EPS) estimates last quarter. Over the past four earnings announcements, Salesforce has had a decent earnings history, missing EPS and revenue estimates once. With that said, CRM stock has failed to maintain the recent all-time high price of $369 per share.
The stock currently sits around $310 per share, which is on the lower end of the 2025 trading range so far. It will be interesting to see if Salesforce execs can wade through the earnings storm and post a strong report in a few days.
Market Expectations and Options Analysis
When we evaluate earnings announcements, we can also look at the implied volatility of the options market to give us context around what the market is expecting this week.
:max_bytes(150000):strip_icc()/ImpliedVolatility_BuyLowandSellHigh2-2f5a33f6dde64c808b4d4775a258d3d7.png)
Looking at this week's option expiration cycle, we can see a +/- $26.29 expected stock price move for CRM. This is about 8% of the notional value of the stock price, which puts Salesforce on the higher end of the 5% to 10% range we typically see for stocks reporting earnings. Looking farther into time, we see a +/- $48.67 expected stock price move through the June expiration. That means the expected move this week makes up for over 50% of the stock's expected range over the next 116 days.
The market is not taking this earnings announcement lightly, and given the recent earnings history and expanded Google partnership, we could see fireworks after the close on Wednesday.
Outlook for Salesforce Stock
If you're bullish on CRM stock for earnings, you want to hear a more detailed plan for the Google partnership expansion that was just released, and you want to see EPS and revenue estimates exceeded. The stock has had volatile moments over the past few months, but it's still way up from recent lows of $220 late last year. Salesforce bulls are looking for a momentum generator, and the Google partnership could be just that.
If you're bearish on CRM stock for earnings, you may be wary of the lack of movement to the upside in the stock price after the Google news. You may also think high implied volatility in a well-known tech stock isn't necessarily a good thing. High implied volatility translates to uncertainty, and binary events are certainly unpredictable. Any sort of EPS or revenue miss may make it hard for the stock price to rally off recent lows.
Tune in to Options Trading Concepts Live on Wednesday at 11 a.m. CST for an in-depth options trading strategy overview for Salesforce (CRM), Snowflake (SNOW), and NVIDIA (NVDA) earnings.
