Salesforce: A Sticky Wicket?

Now, Salesforce (CRM +4.66%). A rather enormous beast of a company, wouldn’t you say? They’ve been counting the pennies, and the latest tally, announced on February 25th, shows a revenue rise of 12% to a whopping $11.2 billion. Not bad, not bad at all. Their adjusted earnings per share grew by a rather respectable 37% to $3.81, beating what the clever clogs analysts expected by a plump $0.76. It’s like finding a golden ticket in a rather ordinary chocolate bar.

Over the full year, revenue nudged up 10% to $41.5 billion, and adjusted earnings climbed 23% to $12.52 per share. For the coming year, they’re expecting another 10-11% rise, with their recent gobbling up of Informatica adding a little extra jam to the sandwich – roughly three percentage points, they say. A bit like adding extra sprinkles to a rather plain pudding.

They’ve set a goal of $63 billion in revenue by 2030, which means a steady 10% growth each year. Perfectly reasonable, you might think. But compared to the truly speedy cloud giants like Microsoft (MSFT +0.47%) and Alphabet (GOOG 1.62%) (GOOGL 1.51?), it’s more of a gentle amble. A tortoise in a race against cheetahs, if you will.

The days of truly dizzying growth are over for Salesforce, that much is certain. But they’re attempting to sweeten the pill for their patient investors with a rather enormous $50 billion share buyback. That’s 28% of their $180 billion market value! A truly monstrous sum. But does it actually make the stock worth a nibble in this choppy market? That’s the question, isn’t it?

What Does This $50 Billion Actually Mean?

During their little chat (the conference call, you see), the CEO, a Mr. Benioff, declared that the buyback was happening because the stock was trading at “low prices.” A bit of a fib, if you ask me. It’s not exactly a bargain basement steal.

Over the past year, the stock has slumped by about 36%. This was due to slowing sales, worries about rivals with their fancy new AI platforms, and the general grumbling across the tech sector. It’s like a perfectly good balloon losing air.

At $200, the stock appears undervalued, trading at 15 times this year’s earnings. But analysts are only expecting a measly 6% rise in earnings next year. So, it’s reasonably priced, yes, but hardly a screaming buy. And if you look at the real earnings (by generally accepted accounting principles, you see), it’s even more expensive – 27 times this year’s earnings! A rather hefty price tag, wouldn’t you agree?

This $50 billion buyback replaces all previous authorizations. They haven’t set a firm date for when they’ll actually start buying back shares, and they’re not obliged to spend all the money. In other words, it’s all a bit of smoke and mirrors unless they actually do start repurchasing those shares. Over the last three years, they’ve bought back $28 billion worth, but it only reduced the number of outstanding shares by a measly 4%. Why? Because they keep handing out stock to employees. A bit like filling a leaky bucket, isn’t it?

Should You Buy Salesforce Right Now?

This big buyback plan might prop up the earnings, but it also admits that they’ve run out of fresh ideas. Their new Agentforce platform might keep them in the AI race, but it won’t be a roaring success anytime soon. So, for the time being, I’d advise avoiding Salesforce – even if they do decide to splurge on buybacks and dividends. It’s a bit like a tired old pony – it might look pretty, but it won’t win any races. A cautious approach, I believe, is the wisest course of action.

2026-02-26 22:52

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