Is Salesforce Stock Cheap Because Software Is Dying?
Salesforce (CRM) trades at 20.6 times earnings, below the S&P 500 median of 22.6, after losing 2.8% over the past twelve months while the index gained 17.9%. A profitable software company priced under the market is the setup value buyers wait for. The question is whether that is a good business on sale or a fair price for a legacy platform facing disintermediation from next-generation AI architectures.
Is Salesforce’s Business Actually Deteriorating?
Salesforce sells the customer relationship software that companies run their sales and service teams on, and it owns Slack. Deutsche Telekom and FIFA both expanded their AI spending with Salesforce in fiscal Q2 2027. Revenue over the trailing twelve months was $43.94 billion, up 11.2%. The three-year average revenue growth rate is 9.9% a year—ahead of the S&P 500 median of 8.3%—making the last twelve months the faster of the two.
Free cash flow over the same window was $15.15 billion, a 7.6% yield on the market value. Operating margin over those twelve months is 21.5% against an S&P 500 median of 18.6%, and the margin did not thin against the year before.
Does The Cash Grow Like The Revenue?
Free cash flow in fiscal Q2 2027 was $1.1 billion, up 81% from a year earlier. That is one quarter. For the whole of fiscal 2027 management guides free cash flow growth of 4% to 5%, against revenue guided up 11% to 12%, so cash is set to grow at less than half the pace of the top line.
License revenue is a headwind and integration and analytics revenue is volatile, management says, though both only partially offset growth in the newer lines. Near $243, the stock is just 8% off its 52-week high, though it remains about 33% below its two-year peak of $363.22: while the recent rally closed the immediate valuation gap, the longer-term discount reflects that structural hesitation hasn’t fully cleared.
Can Salesforce Turn Its Agents Into Cash?
Management’s answer has a name. Claudeforce puts Anthropic’s Claude on top of Salesforce data and workflows, launching with a plugin of 37 prebuilt sales skills. The agent business underneath it already bills: Agentforce annual recurring revenue reached $1.5 billion, and Agentforce IT Service has passed 450 enterprise customers, including key competitive displacements in the ITSM space.
The test is management’s own raise: fiscal 2027 revenue is now guided between $46.1 billion and $46.4 billion. The midpoint lifted by $200 million over the previous $46.05 billion outlook, driven by a $300 million increase in constant currency offset by a $100 million currency headwind. Only $100 million of that raise is organic. The other $200 million is the expected contribution from the pending Contentful and Fin acquisitions. Clearing the guide on the organic third would settle the argument; needing the deals to close would leave it open.
The headline valuation discount remains evident, while core operating metrics show fundamental stability rather than structural decline. Growth, margins, cash conversion and the guidance direction all held up, even with cash guided to lag revenue. The market has started to agree: CRM has returned 42.5% over the past three months, after losing ground over the past twelve.
What none of that settles is whether agents pay Salesforce the way application software has, and that is what the remaining discount is arguing about. Our Buy the Dip screen separates the marked-down names whose numbers hold up from the ones whose numbers explain the fall.
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