Salesforce (CRM) Pre-earnings Analysis
Salesforce investors are hoping for a turnaround in the stock before the year ends as the company’s valuation sits 30% below where it started the year. The best chance for a turnaround boost could come from earnings, which are expected today after market close.
Why has Salesforce sold off this year?
It wasn’t necessarily a fault of their own, the company has great execution and dominates the customer relationship management (CRM) space. However investors weren’t so interested in mature businesses in 2025, they were more focused on hyper-growth. Sure, Salesforce posted a strong 8% and 10% revenue growth in the past two quarters, but that’s nothing compared to semiconductors and hyperscalers posting 30-60% revenue growth.
Salesforce is still a growth engine, but not enough to excite investors. The company is trying to change that by offering AI solutions to their customers, including:
- Agentforce 360 & AI Agents
- Slack as AI hub
- Anthropic partnership: if Anthropic goes public next year, its partners may get a boost.
The good news for Salesforce is that they have a sticky business that is deeply integrated to many businesses, making it hard for their customers to switch. If they can successfully upsell artificial intelligence solutions, it could unlock a lot of revenue for them and turn them back into a growth stock rather than a maturing one.
Despite its sell-off this year, Salesforce still trades at a premium when it comes to its price to earnings ratio. At 33x, it’s above the S&P 500’s average of 27-30x, which is already elevated. This doesn’t necessarily mean the stock will sell-off, but it is vital for them to meet profit expectations on earnings and perhaps even raise guidance.
The company’s strong outlook easily justifies the current price, making it a possible winner next year, especially as AI valuations fall under question. Investors may drift back into “consistent and predictable” businesses like Salesforce under the tech sector, but Salesforce must show AI implementation success and sustain outlook to avoid keep buyers interested.
Threats:
Microsoft Dynamics 365, Oracle, SAP, HubSpot, Zendesk, and others are fighting for CRM marketshare. This could erode growth in the long run if businesses begin favoring one over Salesforce. They must stay competitive. Weak job market could also pose a big threat to growth.