After Earnings, Is Salesforce Stock a Buy, a Sell, or Fairly Valued?

Salesforce CRM released its fourth-quarter earnings report on Feb. 25. Here’s Morningstar’s take on Salesforce’s earnings and stock.

Key Morningstar Metrics for Salesforce

• Fair Value Estimate

  : $300.00

• Morningstar Rating

  : ★★★★

• Morningstar Economic Moat Rating

  : Wide

• Morningstar Uncertainty Rating

  : High

What We Thought of Salesforce’s Q4 Earnings

Salesforce’s fourth-quarter revenue grew 10.0% in constant currency to $11.2 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.

Why it matters: Artificial intelligence remains key, and momentum here is positive, with total Agentforce and Data 360 annual recurring revenue of $2.9 billion, up 200% year over year, while stand-alone Agentforce ARR passed $800 million and was up 169% year over year.

• Both subscriptions and services were about in line with our model, with the various clouds coming in about as expected. Billings accelerated again to 18% year-over-year growth, topping revenue growth and consistent with management’s call for top-line acceleration in the second half.

The bottom line: We’ve lowered our fair value estimate for Salesforce to $300 per share from $325 on lower long-term growth estimates. The seat-based model the firm uses is under intense scrutiny, which pressured software stocks in 2025 and into 2026, despite our belief that AI is more of a tool than a threat.

• While shares look cheap, we note the AI fear around software with our High Morningstar Uncertainty Rating. For context, our model shows a fair value of $240 with growth beyond year 10 set at 0%. We also note that our model is meaningfully below management’s fiscal 2030 targets.
• We think wide-moat Salesforce will survive the current iteration of the death of software and probably even thrive in the age of AI. That said, it is hard to recommend any software stock in this environment of extreme uncertainty.

Coming up: The fiscal 2027 outlook is slightly better than we expected, with revenue of $45.80 billion-$46.20 billion, a 34.3% non-GAAP operating margin, and non-GAAP earnings per share of $13.11-$13.19.

• Management’s confidence around revenue acceleration is higher, so much so that they have firmed up the timeline to the second half of fiscal 2027.

Fair Value Estimate for Salesforce

With its 4-star rating, we believe Salesforce’s stock is moderately undervalued compared with our long-term fair value estimate of $300 per share, which implies a fiscal 2027 enterprise value/sales multiple of 6 times, adjusted price/earnings multiple of 23 times, and a 5% free cash flow yield.

Read more about Salesforce’s fair value estimate.

Economic Moat Rating

For Salesforce overall, we assign a wide moat rating, arising primarily from switching costs, with the network effect serving as a secondary moat source. Based on the firm’s product lines, we believe Sales Cloud, Service Cloud, and Salesforce Platform and other have earned wide moats, while Salesforce, Marketing and Commerce Cloud, and Data Cloud have carved out narrow moats. Agentforce should help defend the company’s moat from the emerging AI threat.

While services, which is a small portion of revenue, help facilitate software sales and contribute to customer relationships, we do not think the company’s professional services business would warrant a moat on a stand-alone basis. We believe Salesforce’s moat will probably allow the company to earn returns in excess of its cost of capital over the next 20 years.

Read more about Salesforce’s economic moat.

Financial Strength

We believe Salesforce is a financially sound company. Revenue growth is reflective of a mature large-cap software company, while margins continue to expand. As of January 2026, Salesforce had $9.6 billion in cash and investments, offset by $14.4 billion in debt, mostly related to the Slack and Informatica acquisitions, resulting in a net debt position for the first time in many years. Gross leverage sits at 1 times trailing non-GAAP EBITDA, which we do not view as problematic, given that we expect the company’s strong and expanding free cash flow generation.

Operating margins continue to expand as Salesforce focuses on profitable growth. Management expects continued expansion of non-GAAP operating margins over the next several years. Further, Salesforce generated free cash flow margins in excess of 25% in each of the last three years, including 31% in fiscal 2025. We believe that margins should ultimately exceed 30% as growth slows, and we appreciate management’s more balanced approach between growth and margins. We think this level of free cash flow generation should contribute to a muscular balance sheet for years to come.

Read more about Salesforce’s financial strength.

Risk and Uncertainty

We assign Salesforce an Uncertainty Rating of High. We believe CEO Marc Benioff will be difficult to replace, as he pioneered the software industry, co-founded the firm, and led it to be a dominant force with a broad portfolio of sales and marketing-related solutions.

Generative AI is an emerging risk for software vendors. In the most pessimistic view, AI can be considered a threat to certain types of software. More positively, AI can be seen as an opportunity for incumbent vendors to embed their own AI solutions into their platforms, thereby potentially enhancing revenue and strengthening their moats. Salesforce largely operates on a seat-based model, which may face pressure from AI-driven efficiency gains, but offers AI features on a consumption basis. After several missteps early in the AI evolution, we think Agentforce is now on a positive trajectory.

Read more about Salesforce’s risk and uncertainty.

CRM Bulls Say

• Salesforce dominates its core CRM and service markets, but it still only controls 30% in a highly fragmented market that continues to grow in the 10% area each year, suggesting there is still room to run.
• The company has added legs to the overall growth story, including customer service, marketing automation, e-commerce, analytics, and AI.
• As growth has decelerated, management is focused on improving margins and enhanced capital returns in the form of both dividends and stock buybacks.

CRM Bears Say

• As the company gets larger, it may be increasingly difficult for Salesforce to grow faster than its various end markets.
• Salesforce has entered new areas via acquisition and has arguably paid material premiums in the process. Integration risk is real, as is the risk of increasingly large, dilutive, or ill-conceived deals.
• The company’s generative AI strategy has been a series of fits and starts. Even as Agentforce is now gaining traction, AI increases the risk of new or enhanced competition and pressure on existing seat counts.

This article was compiled by Rachel Schlueter.