Salesforce AI Beat Tests Software Cash and Grid Yields
The market spent a few months treating software like a dead man walking. Salesforce (CRM) then printed second quarter sales of $11.35 billion, up 11 percent year over year, and current remaining performance obligation of $33.5 billion, up 14 percent. Same window, PG&E (PCG) rolled out a Bay Area virtual power plant built on more than 20,000 smart home devices with Google, Tesla, and Sunrun. AI is still the story. Cash is still the scoreboard.
Salesforce printed bookings, not slogans
Revenue landed at $11.35 billion for the quarter ended July 31, 2026. Consensus sat near $11.33 billion, so the top line beat was thin. Recurring software and support revenue came in at $10.8 billion, up 12 percent. Informatica, bought in late 2025, added $456 million of sales. Organic growth is slower than the headline.
The backlog is cleaner. Current remaining performance obligation hit $33.5 billion, up 14 percent. Total remaining performance obligation was $66.3 billion, up 11 percent. Operating cash flow rose 71 percent to $1.3 billion. Free cash flow rose 81 percent to $1.1 billion. GAAP operating margin was 20.5 percent. Adjusted operating margin was 34.1 percent. Dead software companies do not throw off a billion dollars of free cash in a quarter.
Management raised full year fiscal 2027 revenue guidance to $46.1 billion to $46.4 billion. That is a $200 million lift, or $300 million in constant currency after a currency headwind. About $200 million of the raise comes from pending deals for Contentful and Fin. Another $100 million is organic. The scare assumed customers would stop signing. They did not.
AI recurring revenue is growing. The earnings beat is noisier
Agentforce and Data 360 annual recurring revenue reached nearly $3.9 billion, up more than 210 percent. Agentforce alone topped $1.5 billion, up more than 240 percent. Customers ran 3.2 billion agentic work units in the quarter, up 97 percent from the prior period. Slackbot users jumped more than 150 percent quarter over quarter.
The company also launched Claudeforce with Anthropic, tying Claude models into Salesforce data, workflows, and Slack. General availability is slated for September, and customers will need premium editions to get it. That is a price ladder, not a gift.
Adjusted earnings of $5.90 a share more than doubled from a year ago and cleared the $3.27 consensus by a wide gap. Treat that number with a wrench, not a halo. GAAP earnings were $4.29 a share. The quarter included a large mark on the Anthropic stake, reported around $2.61 billion. Diluted share count also fell, to about 821 million from 962 million a year earlier, after a $25 billion accelerated repurchase. The operating engine is better. It did not magically double.
A 70 percent bounce still leaves a modest multiple
Shares jumped about 13 percent after hours to around $232 after closing near $206, when the stock was still down about 22 percent year to date. The rebound from the lows is now about 70 percent. The name has since traded in the mid $250s.
Even after that bounce, one common adjusted view still puts CRM near 15.3 times fiscal 2027 earnings. That is not cheap if AI growth stalls. It is not expensive if the $3.9 billion of AI and data recurring revenue keeps compounding and free cash flow stays above $1 billion a quarter.
Salesforce paid $364 million in dividends in the quarter. The quarterly cash dividend sits at $0.44 a share, a yield under 1 percent at recent prices. This is a buyback stock that happens to send a check, not a high yield name. Income investors who only sort by yield will skip it. Those who track cash returned per share should not.
PG&E turns 20,000 home devices into grid capacity
PG&E introduced a virtual power plant pilot in the Bay Area designed to pull more than 20,000 smart home devices into one dispatchable pool. Named partners include Google, Tesla, and Sunrun. The utility frames the effort as SHARE, short for Smart Home Assets for Reliability and Efficiency, with discounted home upgrades and enrollment of devices already in kitchens and garages.
This is not a new power plant. It is software on top of batteries, thermostats, and panels that customers already own. California already showed the model can move real megawatts. A 2025 test with Tesla and Sunrun batteries delivered about 539 megawatts over two evening hours, enough to look like a mid size gas peaker without pouring concrete.
PCG is a recovering dividend name, not a yield aristocrat. The stock closed near $13 on September 2. The quarterly dividend is $0.05, or $0.18 annualized, a yield around 1.3 percent with a payout ratio near 13 percent. That check was rebuilt after a long halt. A virtual power plant does not raise it next quarter. It tests whether the utility can squeeze more capacity from the existing grid while large new loads keep lining up.
What this means for income investors
First, separate operating cash from accounting fireworks. Salesforce generated $1.1 billion of free cash flow and sent $364 million out as dividends while shrinking the share count. That is the durable part. The $5.90 adjusted earnings print is not a run rate.
Second, low yield does not mean no cash. CRM and PCG both yield around 1 percent. Salesforce is buying back stock at a scale that lifts earnings per share even if sales grow at 11 percent. PG&E is still rebuilding a conservative payout after years of interruption. Yield screeners treat them as similar. The cash math does not.
Third, the AI cycle is leaking into both software and the grid. Salesforce is selling agents into existing customer data. PG&E is selling flexibility from existing home devices. Neither story is a reason to chase yield. Both are reasons to watch whether cash flow can keep up if AI spend stays high and the wires have to absorb it.