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Salesforce’s Recent Performance and Market Position
Salesforce has experienced a challenging six-month period, with its stock declining by 17.4%. In contrast, the broader Zacks Computer – Software industry saw a significant increase of 16.6%. This downturn has left Salesforce lagging behind other major players in the enterprise software sector, such as Microsoft, SAP, and Oracle. Over the same period, Microsoft, SAP, and Oracle have seen their shares rise by 17.1%, 20.5%, and 42.2%, respectively.
This stark difference raises an important question: Should investors consider moving away from Salesforce, or is there still long-term value in holding onto the stock? While near-term challenges are affecting the company’s performance, there remains a strong fundamental case for maintaining an investment in Salesforce.
Understanding the Factors Behind Salesforce’s Weak Performance
One of the primary reasons for Salesforce’s underperformance is a decelerating growth trend. For many years, the company consistently delivered double-digit revenue increases. However, this pace has now slowed to single digits. In the first quarter of fiscal 2026, revenues increased by only 7.7% compared to the previous year, while non-GAAP earnings per share (EPS) rose by just 5.7%.
This slowdown is attributed to cautious enterprise spending amid economic uncertainty and geopolitical pressures. Analysts predict that this trend will continue, with mid-to-high single-digit growth expected for fiscal 2026 and 2027. Additionally, profit forecasts indicate that Salesforce’s EPS is expected to grow at a compound annual growth rate (CAGR) of 12.9% over the next five years, a significant drop from the 27.8% CAGR it achieved in the previous five years.
This shift in growth dynamics highlights how businesses are adjusting their IT budgets. Instead of large-scale digital transformation projects, many companies are opting for smaller, lower-risk investments. For Salesforce, this means adapting its strategy to remain competitive and relevant in the evolving market.
Despite these challenges, Salesforce continues to hold a dominant position in the global customer relationship management (CRM) software market, according to Gartner. This leadership provides a solid foundation for the company to return to a more robust growth trajectory.
Can Salesforce Regain Its Momentum?
Although Salesforce has faced recent slowdowns, it remains the leading player in the CRM space. Its platform is deeply integrated across enterprise systems, making it a preferred solution for many businesses. The company has also expanded beyond traditional CRM through strategic acquisitions, including Slack, Informatica, Own Company, and Zoomin. These moves reflect a long-term strategy to grow in areas such as collaboration tools, cybersecurity, and AI automation.
Artificial intelligence (AI) plays a central role in Salesforce’s future. The company launched Einstein GPT in 2023, which powers generative AI features throughout its platform. These tools help users automate tasks, make better decisions, and serve customers more efficiently.
Another key factor supporting Salesforce’s long-term prospects is the rising global spending on generative AI. Gartner estimates that worldwide generative AI spending will reach $644 billion in 2025, representing a 76.4% year-over-year increase. Enterprise software, a critical segment for Salesforce, is expected to grow even faster, with a projected 93.9% increase. Even if short-term economic conditions slow down spending, digital transformation remains a top priority for businesses, ensuring steady demand for Salesforce’s solutions.
Evaluating Salesforce’s Valuation
One positive aspect of Salesforce’s recent underperformance is that its valuation has become more attractive. 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 reflected in the stock price.
Additionally, Salesforce is trading at a lower P/E multiple compared to its industry peers. Microsoft, Oracle, and SAP currently have P/E multiples of 33.16, 34.11, and 40.71, respectively. This relative discount makes Salesforce an appealing option for long-term investors.
Final Take: Should You Hold Salesforce?
While Salesforce’s slowing growth is real and has impacted its stock price, the company’s leadership in the CRM space, focus on AI, strategic acquisitions, and reasonable valuations provide compelling reasons to stay invested for the long term. However, near-term caution is still warranted. Until growth picks up or visibility improves, holding onto Salesforce stock appears to be the most prudent move.
At present, Salesforce carries a Zacks Rank #3 (Hold), indicating that it is a suitable holding for investors seeking stability in a volatile market.
