What Is Going On With Salesforce Stock

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Shares of Salesforce (CRM) trade at 20.4 times earnings. That multiple trails the 22.6 median for S&P 500 companies, following a year where the software maker's stock fell while the S&P 500 rose. Over the last twelve months, Salesforce grew revenue 11.2%, outpacing the 8.5% median company growth rate. Buyers at this price need those earnings to come from selling software, and they need the growth from Slack and Agentforce to last. How solid are those earnings?

Most Of Salesforce's Earnings Come From Selling Software

Salesforce earned a 21.5% operating margin over the last twelve months, clearing the 18.5% median for the S&P 500. Investors also pay less for each dollar of cash flow, putting a 12.5 multiple on Salesforce's cash from operations against 15.2 for the broader market.

The profit supporting that P/E ratio presents a soft spot. Salesforce posted a 22.0% net margin over the same twelve months. With net margin sitting higher than operating margin, a portion of that profit came from outside day-to-day operations. The divergence happened in one quarter only: in fiscal Q2 2027, when net margin reached 31.1% against a 21.4% operating margin. That operating margin was also down from the 22.8% reported in fiscal Q2 2026.

Salesforce's Growth Has More Than Halved Since 2022

Current pricing appears to assume Salesforce will maintain its current growth rate rather than returning to the pace of a few years ago. Revenue expanded 24.6% in the twelve months to July 2022, compared with 11.2% over the last twelve months. By the end of September 2026, investors paid 4.3 times Salesforce's sales. Stretching back to the end of 2016, investors paid less at just two of the preceding 39 quarter ends.

The last twelve months still proved better than the prior two years. Revenue climbed 10.3% in the twelve months to July 2024 and 8.3% in the twelve months to July 2025. The latest quarter slowed down, however, with revenue up 10.8% in fiscal Q2 2027 against 13.3% in fiscal Q1. Across fiscal 2026, Salesforce's two largest business units, which the company now names Agentforce Service and Agentforce Sales, grew 8.4% and 8.5%.

Is Salesforce Lifting Growth With Slack And Agentforce?

So far, Salesforce has lifted growth in one business. The unit housing Slack and the Agentforce 360 Platform posted 22.6% growth in fiscal 2026, accelerating from 9.6% the year before. Agentforce Marketing and Agentforce Commerce moved in the opposite direction, with growth slowing to 2.8% from 7.5%.

Management raised its fiscal 2027 sales growth guide to a midpoint of 11.5%, up from 11.0% in May. About two-thirds of that increase, however, was to come from two acquisitions, Contentful and Fin, and the Fin deal has since closed. On Oct 20, Salesforce also agreed to buy Braze for about $5.66 billion, in a deal expected to close in fiscal 2028.

What A Buyer At This Price Takes On

Buyers at this price take on cash flow that management expects to grow slower than sales, along with far more debt than a year ago. Management expects operating and free cash flow to expand 4% to 5% in fiscal 2027, landing below the revenue guide. Total debt more than tripled in the year to July 31, 2026, while the company advanced a stock buyback that management expects to retire at least 14% of shares. That debt equals 21.1% of Salesforce's market value, near the 19.4% rate for the S&P 500.

If Salesforce earns the combined net margin of the three quarters preceding fiscal Q2 2027, the P/E ratio at today's share price would climb above the median company's level, erasing the valuation discount.

Most of Salesforce's earnings come from selling software, while growth contributions from Slack and Agentforce remain less settled. Buying at this price requires a bet that Salesforce can hold its 11.2% growth while its earnings come from selling software, rather than an assumption that the market has missed a sound business. When Salesforce reports in December 2026, sales growth in fiscal Q3 2027 against management's guide of 11% to 12% will be the number to watch.

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