Salesforce Slides 17% in Six Months: Should You Still Hold the Stock?
Moreover, Salesforce has been left behind by other major players in the enterprise software world, including Microsoft Corporation MSFT, SAP SE SAP and Oracle Corporation ORCL. Shares of Microsoft, SAP and Oracle have risen 17.1%, 20.5% and 42.2%, respectively, over the past six months.
The sharp contrast raises a tough question: Is it time to move on from Salesforce, or is there still long-term value in holding on? While near-term issues are weighing on the stock, there's still a strong fundamental case for staying invested.
Six-Month Price Return Performance
What's Behind Salesforce's Weak Performance?
A decelerating growth trend has turned investors cautious about the company's near-term prospects. For years, Salesforce delivered double-digit revenue increases. However, that pace has now cooled to single digits. In the first quarter of fiscal 2026, revenues rose just 7.7% from a year ago, and non-GAAP earnings per share (EPS) grew by only 5.7%.
This slowdown reflects cautious enterprise spending amid economic uncertainty and geopolitical pressures. Analysts anticipate that this trend will persist, with mid-to-high single-digit growth expected for fiscal 2026 and 2027.
The impact is also visible in profit forecasts. Salesforce's EPS is now expected to witness a CAGR of 12.9% over the next five years, a big drop from the 27.8% CAGR it posted over the previous five years.
This changing growth profile shows how businesses are adjusting their IT budgets. Instead of large digital transformation projects, many are opting for smaller, lower-risk investments. For Salesforce, this means adapting its strategy to stay competitive and relevant.
Nonetheless, Salesforce still leads the global customer relationship management software market and holds the biggest market share, according to Gartner. This leadership position gives it a solid base to return to its solid growth trajectory.
Can Salesforce Get Its Momentum Back?
Despite the recent slowdown, Salesforce remains the dominant player in the CRM space. Its platform is deeply integrated across enterprise systems, making it a go-to solution for businesses.
Salesforce has expanded beyond just CRM through acquisitions like Slack, Informatica, Own Company and Zoomin. These deals reflect a long-term strategy to grow in areas like collaboration tools, cybersecurity and AI automation.
AI is central to Salesforce's future. Its Einstein GPT product, launched in 2023, now powers generative AI features throughout the platform. These tools help users automate tasks, make better decisions and serve customers more efficiently.
Another long-term tailwind is rising global spending on generative AI. Gartner estimates that worldwide generative AI spending will hit $644 billion in 2025, implying a 76.4% year-over-year increase.
Enterprise software, a key segment for Salesforce, is expected to grow even faster, with a projected 93.9% increase. Even if economic conditions slow down spending in the short term, digital transformation remains a top priority for businesses, ensuring steady demand for Salesforce's solutions.
Valuation: Is Salesforce Now a Bargain?
One of the silver linings of stock underperformance is that Salesforce's valuation has become more reasonable. The stock currently trades at a forward 12-month price-to-earnings (P/E) multiple of 22.75, significantly below the industry average of 34.42. This undervaluation suggests that much of the near-term pessimism is already priced in.
Also, Salesforce is trading at a lower P/E multiple compared to industry peers such as Microsoft, Oracle and SAP. At present, Microsoft, Oracle and SAP have P/E multiples of 33.16, 34.11 and 40.71, respectively.
Final Take: Hold Salesforce for Now
Salesforce's slowing growth is real and has weighed on its stock price. However, its leadership in the customer relationship management software space, focus on AI, strategic acquisitions and reasonable valuations provide reasons to stay invested for the long term.
Still, near-term caution is warranted. Until growth picks up or visibility improves, holding onto CRM stock seems the smartest move.
Salesforce carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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