Debunking the "SaaS doomsday theory"! Salesforce's earnings report exceeded expectations, causing its stock to surge 10% in pre-market trading, and institutions significantly raised their target prices.

With better-than-expected earnings and a forward-looking AI alliance, Salesforce has powerfully shattered Wall Street's pessimistic narrative of a "SaaS pocalypse," re-establishing the growth anchor and pricing power of enterprise software giants in the AI era.

The company's newly released second-quarter results and third-quarter guidance both exceeded market expectations, driving its stock price up by approximately 13% in after-hours trading on Wednesday and maintaining a 10% gain in pre-market trading on Thursday. This strong performance not only demonstrates the resilience of its core subscription business but also directly alleviates the market's deep-seated anxiety about traditional SaaS companies being disrupted and replaced by generative AI.

At the same time, the company announced a new partnership with AI unicorn Anthropic, injecting a boost into its AI product line. With institutions collectively raising their target prices and implementing a large-scale stock buyback program, Salesforce is becoming a key catalyst for a sentiment reversal across the entire SaaS sector.

However, beneath the surface of a rebound in software sector sentiment, market skepticism is brewing regarding the calculation methods for annual recurring revenue (ARR) of AI companies. This controversy not only concerns the financial transparency of individual companies but could also have a profound impact on the overall valuation logic of the AI and SaaS sectors.

Earnings and guidance both exceeded expectations, and the stock surged in after-hours trading, breaking the recession curse.

Previously, concerns about a slowing macroeconomy leading to reduced software spending by businesses had intensified, with the market even speculating on an extreme downturn in the SaaS industry. Salesforce's latest earnings report directly shattered this jinx.

Data shows that Salesforce's total revenue for the second fiscal quarter reached $11.35 billion, an 11% year-over-year increase; adjusted earnings per share (EPS) were $5.90, significantly exceeding Wall Street expectations. More forward-looking, the company's revenue guidance for the third fiscal quarter is between $11.42 billion and $11.5 billion, significantly higher than the average analyst expectation. Furthermore, current remaining fulfillment obligations (RPO) are expected to grow by approximately 14%, directly reflecting customer commitment and demand stickiness for future services.

Better-than-expected fundamentals triggered a positive response from the capital and derivatives markets. Before and after the earnings release, the trading volume of Salesforce's single-stock options contracts exceeded that of the entire IGV Software ETF, with call options accounting for as much as 61% of the total premium. Implied volatility was expected to be around 7.8% in the stock price after the earnings report.

Behind the upgraded ratings from agencies is the bottom support provided by the company's aggressive capital return plan. Salesforce announced an accelerated share repurchase agreement (ASR) of up to $25 billion and raised funds through the issuance of approximately $24.842 billion in bonds. Although this move pushed non-current debt to $39.28 billion, the large-scale repurchases conveyed to the market management's strong confidence in future cash flow and profitability.

Partnering with Anthropic to deepen strategic planning and alleviate anxieties about AI replacement

While consolidating its core business, Salesforce is accelerating the transformation of its AI strategy into a tangible business moat. The company's latest announcement of a new partnership with Anthropic, a leading AI company, is a key growth driver this earnings season.

This collaboration is not simply a combination of technologies, but a key step for Salesforce to strengthen its AI product line and deepen the implementation of enterprise-level AI applications. By introducing Anthropic's advanced underlying large-scale model capabilities, Salesforce can further enrich the functionality of its AI products and improve the efficiency of enterprise customers in scenarios such as automation, data analytics, and customer interaction.

For investors, the alliance with Anthropic provides a substantial reason to remain optimistic. In the increasingly fierce competition of generative AI, the market has worried that traditional SaaS software will be replaced by AI-native applications. Salesforce, through a dual-engine approach of strong external alliances and internal product iterations, is accelerating the construction of its differentiated competitive advantage in the AI era, successfully transforming the anxiety of being "replaced by AI" into a growth logic of "leveraging AI."

Institutions collectively raise target prices; ARR valuation controversy hints at revaluation risk.

The CNBC investment team considered this result a major victory and raised their target price to $250 per share.

In addition, several Wall Street firms have raised their target prices for Salesforce, reiterating their optimism about its long-term growth potential, indicating that funds are reassessing and pricing the long-term value of the SaaS leader.

However, beyond the optimism, the market is raising serious questions about how financial metrics for AI companies are calculated . For example, regarding the Annual Recurring Revenue (ARR) metric favored in Silicon Valley, the market points out that many AI companies' current usage-based pricing models are not suitable for traditional ARR multiplier calculations. Furthermore, simple annualized monthly revenue calculations do not adequately account for seasonal fluctuations in business.

Because unlisted AI companies lack universally accepted standards for financial disclosure, they can selectively disclose financial metrics and incorporate optimistic assumptions. This lack of standardized financial disclosure and the controversy surrounding ARR calculation methods may lead to an overestimation of the actual revenue quality of some AI companies.

This controversy not only concerns the reasonableness of the valuations of AI unicorns like Anthropic, but also poses a challenge to the valuation system of the entire AI and SaaS sector. While investors embrace the fundamental turnaround of SaaS leaders like Salesforce, they also need to be wary of the potential pricing correction risk in the AI sector due to flawed valuation logic.

Risk warning and disclaimerInvesting involves risk; please exercise caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Any investment decisions made based on this information are at your own risk.