Company Reports

Salesforce is the leading customer relationship management, or CRM, software vendor and is repositioning its broad front-office suite as the operating platform for the agentic enterprise. The strategic logic is increasingly end-to-end: Customer 360 applications supply the workflows and business context; Data 360, MuleSoft, and Informatica connect, govern, and harmonize enterprise data; Agentforce supplies the agentic layer; and Slack can serve as the conversational interface. We think this combination, together with Salesforce's installed base and distribution reach, gives the company a credible role even when customers use third-party models.

Salesforce delivered a solid fiscal second quarter, with contracted demand and paid artificial intelligence adoption providing the most encouraging signals. Revenue of $11.35 billion increased 11% year over year and landed near the high end of management’s guidance.

Salesforce’s fiscal first-quarter revenue grew 12% in constant currency to $11.13 billion, while non-GAAP operating margin was 34.8%. Fiscal 2027 guidance was raised slightly to account for upside in the quarter and the substantial accelerated share repurchase program.

The pace of change in the software industry has accelerated in recent months, leading to heightened uncertainty and prompting us to reassess our moat ratings.

Salesforce has established itself as the clear leader in software for all aspects of the customer relationship journey. As the company has matured and growth has slowed, profitability has improved and the capital allocation strategy has evolved. We think the combination of these factors should continue to compound good earnings growth for years to come.

Salesforce’s fiscal fourth-quarter revenue grew 10% in constant currency to $11.20 billion, while non-GAAP operating margin was 34.2%. Fiscal 2027 guidance is approximately in line with FactSet consensus estimates on the top and bottom lines.

Salesforce has established itself as the clear leader in software for all aspects of the customer relationship journey. As the company has matured and growth has slowed, profitability has improved and the capital allocation strategy has evolved. We think the combination of these factors should continue to compound good earnings growth for years to come.

Salesforce’s fiscal third-quarter revenue grew 8% in constant currency to $10.26 billion, while non-GAAP operating margin was 35.5%. Fourth-quarter guidance is as expected after normalizing for the inclusion of Informatica, which recently closed.

Salesforce hosted an investor day at Dreamforce 2025, focusing on artificial intelligence and its Agentforce 360 Solution. Management also introduced new long-term financial targets, including at least $60 billion in revenue and to be a rule of 50 company by 2030.

Salesforce's fiscal second-quarter results topped the high end of guidance, with revenue growth of 9% in constant currency to $10.24 billion, while non-GAAP operating margin was 34.3%. Despite this strength, guidance was largely in line with the FactSet consensus.

Salesforce reported results for its fiscal first quarter that were ahead of the top end of guidance. Revenue growth of 8%, both as reported and in constant currency, to $9.83 billion was driven primarily by strength in data cloud, while non-GAAP operating margin was 32.3%.

Salesforce has established itself as the clear leader in software for all aspects of the customer relationship journey. As the company has matured and growth has slowed, profitability has improved and the capital allocation strategy has evolved. We think the combination of these factors should continue to compound good earnings growth for years to come.

Salesforce has entered into an agreement to acquire Informatica for $25 per share, or approximately $8 billion, which excludes the portion of the firm that Salesforce does not already own. The transaction is expected to close in fiscal 2027.

Salesforce has established itself as the clear leader in software for all aspects of the customer relationship journey. As the company has matured and growth slowed, profitability has improved and the capital allocation strategy has evolved. We think the combination of these factors should continue to compound good earnings growth for years to come.

We are maintaining our $315 fair value estimate for wide-moat Salesforce after the company reported solid fiscal 2025 fourth-quarter results. The newly initiated outlook for fiscal 2026 was slightly below our expectations on the top and bottom lines after normalizing for increasing currency headwinds. Management remains excited about Agentforce, which we think represents a good long-term opportunity to transition from a mostly human agent labor force to a mostly virtual agent pool over time. Importantly, management believes consumption pricing will be a meaningful net positive for the company. After a dramatic run from June through November 2024, where we thought shares ended up overvalued, the stock has pulled back, leaving some daylight back up to our fair value estimate.

On Feb. 5, Salesforce announced it appointed Robin Washington as president, chief operating officer, and chief financial officer effective March 21, 2025. Washington has been on Salesforce’s board of directors since 2013. She is a well-seasoned leader with approximately 13 years as CFO at Gilead and Hyperion. The company had previously announced that Amy Weaver, current CFO, and Brian Millham, current COO, were stepping down and that a search was underway for their successors. While we have no prior experience with Washington, we expect Salesforce to continue on a path of profitable growth and investor-friendly capital allocation established by her predecessor. The company will report fiscal fourth-quarter earnings on Feb. 26 after the market close. Our fair value estimate remains $315.

We raise our fair value estimate for wide-moat Salesforce to $315 per share from $290 after its third-quarter results, while fourth-quarter guidance was slightly shy of our expectations. Still, third-quarter strength more than makes up for the modest guidance differential. Management is very enthusiastic about Agentforce, which we think represents a good long-term opportunity to transition from a mostly human agent labor force to a mostly virtual agent pool over time. Shares have run dramatically and are up 45% to 50% over the last three months, assuming the 9% after-hours surge holds. Even with our fair value increase today, we see shares as overvalued. Our revenue estimate for next year is 1% above FactSet consensus, while non-GAAP operating margin is approximately in line, and shares are trading above our fair value estimate.

We believe Salesforce represents one of best long-term investment opportunities in software, particularly as it should provide investors with a nice balance between revenue growth and improving profitability. Even as revenue growth has decelerated, we believe a new focus on margin expansion, share buybacks, and dividends should continue to compound strong earnings growth for years to come.

While there was no financial update at Salesforce's Dreamforce artificial intelligence event, the firm made various AI-themed announcements. Among these were a heavy dose of Agentforce; a partnership with Nvidia; an expanded partnership with Google; and a deep dive into the data cloud. We made no update to our model and are maintaining our $290 fair value estimate for shares of wide-moat Salesforce. Share performance has been underwhelming year to date; we think this is partly because investors worry about AI disruption. Given the company’s entrenched position with enterprise customers and its leading technology, we conclude that Salesforce is well positioned for the coming wave of generative AI with data cloud and the evolution of both Einstein Copilot and virtual agents. This is combined with the firm’s presence in customer-related software. Based on what we saw at Dreamforce, we are incrementally confident in that position, and we see the stock as attractive.

We are raising our fair value estimate for wide-moat Salesforce to $290 per share from $285 after the company reported good second-quarter results, while full-year revenue guidance was maintained and profitability raised slightly. Macroeconomic conditions continue to weigh on growth, even as the company delivered upside relative to our expectations on both the top and bottom lines. Recent trends continued, with multicloud deals and vertical domain sales driving relative strength compared with expectations. Management was enthusiastic about its new Agentforce platform, which we think represents a good long-term opportunity to transition from a mostly human agent labor force to a mostly virtual agent pool over time. Monetization will be on a per conversation basis. We see some upside to shares still, but the window has narrowed over the last three months.