The Street is Finally Going Bullish on Salesforce and I Keep Buying
Salesforce's Agentforce ARR hit $1.5B, combined with Data Cloud 360 surging 210% YoY, while CRM trades at just a 14x forward P/E with a 7.5% free cash flow yield.
Microsoft owns the reflexive AI trade, but CRM's $50B buyback and shrinking share count from 962M to 821M make it the better destination for new capital.
Liabilities nearly doubled funding the buyback, but interest coverage of 27.5x and net debt/EBITDA of 0.78 keep the balance sheet risk manageable.
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I keep buying Salesforce ( NYSE:CRM ) because the market spent most of this year arguing about whether AI would kill it, and management kept quietly stacking evidence that AI is doing the opposite. Every dip this year, I added. Now the sell-side is finally catching up, and I am still not done.
The pull is simple. Salesforce owns the system of record where the enterprise actually lives, and the AI layer everyone was afraid would replace it is instead pouring recurring revenue back into it. Agentforce ARR hit $1.5 billion, and combined Agentforce and Data 360 ARR reached nearly $3.90 billion, up over 210% year-over-year. Marc Benioff put it flatly on the Q2 call: "AI isn't replacing Salesforce. It's unlocking more value across all four layers of our platform." That is the thesis in one sentence, and the customer proof points back it. Xero rolled Agentforce to 100% of customers with a 62% deflection rate across more than 200,000 interactions. Uber for Business pointed Agentforce at its lead pile and saw 60% more leads converting within two weeks.
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Second, the buyback is doing real work. Diluted share count fell to 821 million from 962 million a year ago thanks to a $25 billion ASR, with a new $50 billion repurchase authorization behind it. The quarterly dividend of $0.44 was raised 5.8% year-over-year. The yield is still modest, and it is growing on a shrinking share count.
Third, the visibility. Current RPO of $33.5 billion, up 14% year-over-year, is future revenue already signed. Management raised full-year FY27 revenue guidance to $46.1 billion to $46.4 billion and reaffirmed the FY30 target of $63 billion. Q2 also marked the sixth consecutive quarter of beating EPS expectations, with non-GAAP EPS of $5.90 versus $3.27 consensus.
Balance-sheet leverage jumped. Total liabilities rose 96.56% year-over-year to fund the ASR, and shareholders' equity declined 37.42%. That is real. What keeps me steady is interest coverage of 27.5x and net debt/EBITDA of 0.78. This company can service the debt with cash flow it prints in a single quarter.
The Street is warming up now, with an analyst target price of $281.89 against a current price of $233.28 and 40 buy or strong-buy ratings against just 2 strong sells. I was buying when shares were down 11.32% year-to-date. I will keep buying while the cash flow keeps compounding and the shares keep disappearing.
If you have cash sitting in your account right now, give this two minutes. After more than two decades of helping investors beat the market, our top analysts at 24/7 Wall St. put together a definitive report on the Top 10 Stocks To Buy Today. And CRM wasn't one of them.
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