Salesforce (NYSE: CRM), a global
leader in customer‑relationship management (CRM) software, already reported its
Q1 FY 2026 earnings (for the quarter ended April 30, 2025). The
results show solid top‑line growth, expanding margins, and strong cash
generation, reinforcing Salesforce’s status as a quality growth stock with
attractive valuation in today’s market. In this article we will dive into Salesforce
recent earnings, stock performance & valuation, growth potential, and the
risks investor should consider.
About Salesforce
Founded in March 1999 by Marc
Benioff, Parker Harris, and others, Salesforce pioneered the integration of
enterprise customer relationship management (CRM) with cloud software. With a
mission to put “the customer at the center of everything,” the company has
grown to become the largest enterprise applications firm by 2022. Headquartered
in San Francisco’s Salesforce Tower, the company now generates over $38 billion
in annual revenue and employs more than 76,000 people. Salesforce’s core
offerings include Sales Cloud, Service Cloud, and Marketing Cloud, which form
the backbone of its CRM platform, as well as newer innovations such as Platform
& Data Cloud, featuring advanced AI integrations.
Salesforce Financial
Performance
In its Q1 FY2026 earnings report
for the quarter ending April 2025, Salesforce reported revenue of $9.83
billion, marking a 7.62% increase from $9.13 billion in Q1 FY2025. Earnings per
share (EPS) for the quarter came in at $1.59, slightly up by 1.92% from $1.56
in the same period last year. On a trailing twelve-month (TTM) basis, revenue
reached $38.59 billion, up 7.97% from $35.74 billion a year earlier. TTM EPS
grew 14.83% to $6.39, compared to $5.57 previously, while free cash flow per
share also improved significantly, rising 13.11% from $11.53 to $13.04. The
company maintained strong profitability with a gross profit margin of 77.34%, a
net profit margin of 16.08%, and a free cash flow margin of 32.77%. Efficiency
metrics also remained solid, with a return on assets (ROA) of 5.09% and return
on equity (ROE) of 10.31%, while the debt-to-equity ratio stood at a
conservative 0.2, reflecting a healthy balance sheet.
Over the past five years,
Salesforce has been growing its revenue at a 15.1% CAGR, net income at 10.4%,
and free cash flow at 30.4%. This shows that Salesforce is consistently
growing, especially in terms of free cash flow.
Salesforce Fiscal 2026
Financial Forecast
Looking ahead, analysts forecast
Salesforce’s revenue to reach $41.23 billion in FY2026, an 8.8% increase from
FY2025’s $37.9 billion. Non-GAAP EPS is expected to rise 10.65% to $11.29 from
$10.20. Analysts have given the stock a "Buy" rating, with an average
price target of $352.92, representing a 28.97% potential upside, while the
highest target stands at $440, implying a potential gain of 60.78%.
CRM Stock Price Performance
and Valuation
At the time this article was written, Salesforce's stock is priced at $273.65 per share, reflecting a 6.3% increase over the past year. While this performance underperforms the S&P 500’s 11.7% gain in the same period, and its five-year return of 37.6% also lags behind the S&P 500’s 95.3% rise, this relative underperformance has resulted in a more attractive valuation for long-term investors.
Salesforce
currently offers a dividend yield of 0.61%, providing an added incentive for
income-focused investors. From a valuation standpoint, the stock trades at a
price-to-sales (P/S) ratio of 6.71 on a trailing twelve-month basis and a
forward P/S of 6.26. Its non-GAAP price-to-earnings (P/E) ratio stands at
26.12, with a forward P/E of 23.9. Additionally, its price-to-free-cash-flow
(P/FCF) ratio of 20.69.
Based on Fiscal.ai data, if we
look at the valuation over the past five years, the forward P/S, forward P/E,
and P/FCF are below the historical average. Even though it looks attractive,
it's important to note that revenue growth is slowing compared to the past few
years. However, the current valuation still makes Salesforce's stock appear
reasonable relative to its growth.
Salesforce Growth Potential
Salesforce growth potential
remains robust, driven by several factors.
- Agentforce Platform Momentum
The Agentforce platform has emerged as Salesforce's flagship AI offering, demonstrating remarkable adoption since its launch. The company has closed over 8,000 Agentforce deals since the platform's introduction, with approximately 4,000 of these being paid engagements. This represents significant growth from the 5,000 total deals and 3,000 paid deals reported in Q4 2025.
Agentforce has achieved notable success in customer implementations, with companies like Engine experiencing a 15% reduction in average customer case handle time and 1-800Accountant achieving 70% autonomous resolution of administrative chat engagements. The platform's ability to handle complex workflows autonomously has resulted in measurable productivity improvements across various industries. - Data Cloud Expansion
Salesforce’s Data Cloud has surpassed $1 billion in annual recurring revenue (ARR), growing over 120% year-over-year, marking a significant milestone for the company’s AI-driven data unification efforts. This platform forms the foundation of Salesforce’s AI initiatives, enabling real-time, unified customer data management across its ecosystem. In Q1 2026, Data Cloud ingested 22 trillion records, a 175% increase year-over-year, demonstrating massive adoption and scalability.
Furthermore, nearly 60% of Salesforce’s top 100 deals included Data Cloud and AI components, reflecting strong market demand for integrated AI solutions that enhance customer insights and operational efficiency. This growth underscores Salesforce’s leadership in combining AI and data management to drive digital transformation and deliver competitive advantages to enterprises globally - Raised Guidance and Future
Outlook
Salesforce raised its full-year fiscal 2026 revenue guidance to a range of $41.0 billion to $41.3 billion, up from the previous $40.5 billion to $40.9 billion, reflecting a $400 million increase at the high end. This adjustment underscores management’s confidence in the company’s growth trajectory amid strong demand for its AI and cloud offerings. The company maintained its non-GAAP operating margin guidance at 34.0%, demonstrating disciplined operational management alongside growth investments.
For the second quarter of fiscal 2026, Salesforce provided revenue guidance between $10.11 billion and $10.16 billion, indicating continued momentum with expected year-over-year growth of 8% to 9%. This revised outlook reflects Salesforce’s strong market positioning and the positive impact of strategic initiatives such as AI platform expansion and the Informatica acquisition
Risks to Consider
While Salesforce seems to be an
investment opportunity, we should be mindful of potential risks.
- Slowing Revenue Growth
Salesforce's revenue growth has slowed from an average of 12.7% over the past three years to a projected 6–8% in fiscal 2026. This deceleration reflects cautious enterprise spending and extended purchase cycles amid economic uncertainty. While revenue reached $37.9 billion in 2025, growth pressures could impact future earnings and stock performance as customers delay or reduce investments in software solutions. - Execution Risk in AI and
M&A Strategy
Salesforce is heavily investing in AI, particularly through its Agentforce platform, but meaningful financial returns are expected only by fiscal 2027. Additionally, the recent $8 billion acquisition of Informatica poses integration risks, as Informatica is not yet fully integrated and is experiencing slower growth. Past integration challenges with acquisitions like Slack and MuleSoft highlight potential risks here. - Rising Competition
Salesforce faces growing competition from major tech firms like Microsoft, Oracle, and SAP, all enhancing their AI-driven CRM platforms. These rivals leverage extensive ecosystems and deep enterprise relationships to offer integrated solutions combining CRM with ERP and advanced analytics. Their focus on AI, data science, and seamless integration challenges Salesforce’s market dominance by providing customers with comprehensive, efficient, and innovative alternatives tailored to diverse business needs
Conclusion
Salesforce offers a compelling
investment opportunity with strong revenue, earnings, and free cash flow
growth, supported by high margins and a healthy balance sheet. While its stock
has underperformed the broader market, this has created a more attractive
valuation. The company’s continued innovation in AI, strategic acquisitions,
and global expansion position it well for future growth. Despite some risks,
analyst projections and solid fundamentals suggest Salesforce remains a strong
long-term buy for investors seeking quality growth at a reasonable price.
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