Enterprise-software leader Salesforce (CRM +2.36%) reported strong fiscal fourth-quarter results this week, with revenue and adjusted earnings per share both coming in ahead of analysts' consensus forecasts for the two metrics. Additionally, it announced a new $50 billion share repurchase authorization.
But the company's guidance didn't show evidence that AI was creating a clear inflection in the software specialist's consolidated top-line growth trends.
Still, overall, the company continues to grow at a robust rate, and its repurchase program adds to the bull case. So, is the stock a buy? After all, shares remain beaten down from their levels last year. The stock is down about 24% year to date as of this writing.
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Strong cash flow and a growing backlog
With the help of a strong fiscal Q4, the software company's total fiscal 2026 revenue rose 10% year over year to $41.5 billion. Notably, Salesforce's revenue growth ticked up a bit in Q4. On a constant-currency basis, Salesforce said revenue grew 10% year over year in the fourth quarter, accelerating from 8% constant-currency growth in the prior quarter.
Of course, a strong suit for Salesforce for a long time has been cash flow. And that strength persisted throughout the year and in fiscal Q4. For fiscal 2026, Salesforce's operating cash flow increased 15% to $15.0 billion, and free cash flow rose 16% to $14.4 billion -- a formidable figure for a company with a $190 billion market capitalization.
Showing how demand is faring, Salesforce's remaining performance obligations (RPO), which the company defines as contracted revenue that has not yet been recognized, totaled $72.4 billion at quarter-end -- up 14% year over year. The current portion (the portion expected to be recognized over the next 12 months) of that figure was $35.1 billion, up 16%.
Highlighting one way AI is a tailwind for the company, Salesforce said Agentforce -- a suite of autonomous AI agents designed to help companies automate tasks with minimal human oversight -- reached $800 million in annual recurring revenue, up 169% year over year.
Additionally, the company is aggressively buying back its stock. In fiscal 2026, the tech company returned $14.3 billion total to shareholders, including $12.7 billion in share repurchases and $1.6 billion in dividends.
Underwhelming guidance
Despite the company's fast-growing remaining performance obligations and its incredible momentum with Agentforce, these catalysts aren't showing up very much in Salesforce's guidance.
Management initiated fiscal 2027 revenue guidance of $45.8 billion to $46.2 billion, which implies about 11% growth at the midpoint from fiscal 2026's $41.5 billion. But that headline growth rate includes about three points of contribution from its recent acquisition of Informatica, meaning the underlying pace is still closer to the high single digits.
The same dynamic shows up in the near-term guide. Salesforce expects first-quarter fiscal 2027 revenue of $11.03 billion to $11.08 billion, up 12% to 13% year over year. But the company said that range includes slightly above four points of Informatica contribution.
To be fair, management is calling for better organic trends later on. Salesforce said it expects organic revenue reacceleration in the second half of fiscal 2027. Still, the company's full-year guidance, which bakes in management's expectations for the second half, is arguably disappointing.
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Key Data Points
And there's also a question about whether the fundamentals even justify the price investors are paying.
As of this writing, the stock is trading at about 26 times earnings -- a valuation that bakes in high-single-digit to low-double-digit earnings-per-share growth for years to come. While this is probably a fair valuation for a software company like Salesforce that has a long history of strong execution, it doesn't leave much wiggle room if growth rates slow from here.
So, is Salesforce stock a buy after this strong earnings report?
I don't think so. The business is producing significant cash, and the buyback is aggressive. But the growth outlook is unimpressive, making the stock look more fairly valued than undervalued.
