We came across a bullish thesis on Salesforce, Inc. (CRM) on Twitter by TechFundies. In this article, we will summarize the bulls’ thesis on CRM. Salesforce, Inc. (CRM)’s share was trading at $284.58 as of March 12th. CRM’s trailing and forward P/E were 44.75 and 25.58 respectively according to Yahoo Finance.
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Salesforce (CRM) reported a lackluster quarter, with results and guidance reflecting a business in slow motion. The company’s CEO, past his prime, is becoming a liability, causing management churn and undermining strategic execution. Growth is decelerating, and investors remain uncertain about how AI-driven productivity gains will balance out with more measured or declining seat growth among clients. While operating margins continue to expand, the CEO’s erratic statements about significantly increasing sales headcount by 10-20% create unnecessary noise and undercut the narrative of disciplined cost management.
Despite the sideways movement in fundamentals, CRM’s risk/reward profile remains favorable, though the upside potential has been trimmed due to lower valuation multiples. The downside case suggests an 11% decline if CRM trades at 18x this year’s street FCF, while the upside scenario points to a 47% gain at 25x next year’s FCF, assuming mid-teens growth. Looking further out to CY27, applying the same multiples would imply a 75% upside. For patient investors, CRM remains a stock with a deeply entrenched product ecosystem that is mature yet under-earning, setting the stage for potential long-term upside.
Revenue trends reflect CRM’s slowing momentum. Subscription revenue grew 8% year-over-year in constant currency, in line with expectations. All major cloud segments saw modest deceleration, with sales and service clouds growing 9%, platform accelerating slightly to 12%, and data cloud trailing at 6%. While cRPO accelerated to 11% year-over-year, it was bolstered by early renewals, suggesting some pull-forward. The company’s AI push gained some traction, with Data Cloud and AI-related ARR reaching $900 million, up 120% year-over-year, signaling early-stage adoption as enterprises prepare for AI-driven automation. However, deal examples were thin, with only modest customer references like Pandora Jewelry and OpenTable leveraging AI for customer support. Internally, Salesforce is seeing productivity improvements from AI, with AgentForce handling 380,000 support requests and improving resolution rates, but sales productivity remains weak.
Profitability is trending in the right direction. Q4 pro forma operating margins expanded to 33.1% from 31.4% a year ago, with GAAP operating margins improving to 21.2%. Stock-based compensation remains elevated at 8% of revenue, indicating continued dilution risk. The company’s Q1 guidance calls for revenue growth of 7.5-8.5% and cRPO growth of 10%, with full-year FY26 guidance forecasting 8% revenue growth, pro forma operating margins of 34%, and FCF growth of 9-10%—all slightly below street expectations.
Beyond the numbers, the earnings call reinforced concerns about leadership. The call started late, and the CEO’s remote work-from-Hawaii setup was emblematic of his growing detachment. His comments lacked depth on customer interactions, and he seemed increasingly disconnected from the business. Meanwhile, management turnover continues to be a concern, and his reluctance to step down is creating headwinds for the company.
Ultimately, CRM is trading at 20x FCF for a reason. While it remains a dominant enterprise software provider with a sticky customer base, the combination of leadership uncertainty, slowing growth, and strategic missteps is capping its valuation. Still, the stock holds upside potential if operational execution improves or AI-driven adoption accelerates, but in the near term, it remains a waiting game for investors.
Salesforce, Inc. (CRM) is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 162 hedge fund portfolios held CRM at the end of the fourth quarter which was 116 in the previous quarter. While we acknowledge the risk and potential of CRM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CRM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.