After years of criticism over its “growth-at-all-costs” strategy, Salesforce (CRM) has shifted gears, prioritizing profitability over relentless expansion. That pivot has caught the attention of legendary value investor Bill Nygren, who recently took a sizable position in the company through the Oakmark Fund. With the stock trending lower for the entirety of the past year, it would seem only a brave man would invest in the stock. However, not all is as it seems…
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Positive sentiment is brewing as the tech stock posts consistent financial results, continues to execute strategic acquisitions, and generates significant growth in key areas like AgentForce and Data Cloud. Despite recent stock underperformance, Salesforce’s ongoing transformation from a top-line-focused software giant into a disciplined, cash-generating powerhouse makes me Bullish about its stock.
CRM Traverses a Market Gauntlet Unscathed
Let’s set the stage before we take a closer look at why Salesforce is appealing to top investors. Salesforce’s stock has been a significant underperformer over the past five years, despite the relative sector strength of the Software industry.
Once a SaaS darling of Wall Street, Salesforce has since soured investor sentiment due to decelerating core growth and mounting competition. Regarding the former, Salesforce has resorted to a flurry of mergers & acquisitions in the past decade to support topline growth it would not have otherwise sustained on its own, including the May 2025 $8 billion acquisition of Informatica.
Some of these have not worked out in their favor in the past, prompting “activist” investment firms, such as Starboard Value, to purchase a significant number of shares in an attempt to “right the ship.”
The macro backdrop hasn’t been kind to Salesforce either in 2025. The market has shifted away from mega-cap technology leaders that previously drove the S&P 500 to new heights. The widespread sell-off is the result of the market reacting to stretched valuations.
Compounding valuation concerns are real macroeconomic pressures driven by tariffs and geopolitical tensions. Subsequently, leading industry analysts, such as Gartner (IT) and Forrester (FORR), have consistently revised their global IT spending forecasts for 2025 downwards.
Finally, artificial intelligence, or AI, has bifurcated the market into “haves” and “have-nots.” Stocks viewed as “pure AI” plays are exploding, while incumbent leaders are being scrutinized on their ability to integrate and monetize this new reality.
CRM’s Story By the Numbers
In its first fiscal quarter of 2026 (ending April 30, 2025), Salesforce delivered a classic beat-and-raise. Revenue came in at $9.8 billion, up 8% year-over-year—a far cry from the 20%+ growth rates of earlier years, but still impressive for a company of Salesforce’s scale. Adjusted EPS hit $2.58, with both metrics topping analyst expectations. Management also raised full-year guidance for both revenue and earnings.
What’s drawing value investors like Bill Nygren is Salesforce’s improving profitability profile. GAAP operating margin expanded to 19.8%, up from 18.7% in the prior year’s quarter, while operating cash flow surged to $6.5 billion—evidence that efficiency and discipline are firmly taking hold.
As for growth, Salesforce is seeing encouraging results in its core cloud subscription. Its Data Cloud and AI offerings have surpassed $1 billion in annual recurring revenue (up over 120% YoY). This is an important nugget. Salesforce is not just cutting costs and improving profitability, but is successfully integrating AI into its applications to support the next phase of growth.
It’s Not All Easy Going for CRM
That said, Salesforce’s outlook isn’t without challenges. Competitive pressures remain significant, particularly from Microsoft’s (MSFT) expanding Dynamics 365 and Azure ecosystem, which now includes AI-powered CRM and ERP solutions. Bears also continue to point to Salesforce’s slowing growth profile, with management guiding for just 6–7% YoY revenue growth—a clear signal of maturation that may dampen enthusiasm among traditional growth investors.
On top of that, a deeper-than-expected economic slowdown could further squeeze enterprise IT budgets. And with large, complex acquisitions such as Informatica (INFA), integration risks add another layer of uncertainty to the story.
A Look at Valuation
Salesforce currently trades at a P/E ratio of 38.5, representing about a 37% premium to its Information Technology sector peers. While that premium may seem steep given the company’s past operational missteps and uneven stock performance, it’s underpinned by Salesforce’s strong profitability—highlighted by an EBITDA margin of 29%—and steady, if modest, revenue growth.
However, relative to certain peers like ServiceNow (NOW), Salesforce’s valuation looks far more reasonable. This suggests that while expectations remain elevated, the company has room to surprise investors on the upside if growth comes in stronger than anticipated.
Is Salesforce a Buy, Hold, or Sell?
On Wall Street, CRM sports a consensus Moderate Buy rating based on 32 Buy, ten Hold, and one Sell rating in the past three months. CRM’s average stock price target of $348.35 implies an upside potential of ~41% over the next twelve months.
CRM’s AI Edge Could Spark a Re-Rating
Salesforce’s transformation is still in its early stages. The backing of a top-tier activist like Starboard Value and a legendary value investor such as Harris Associates’ Oakmark Fund provides a strong foundation for its turnaround story. The numbers reinforce this view—efficiency programs are driving stronger cash generation, while advancements in AI through the Data Cloud and Agentforce automation suite could reaccelerate revenue growth. Such a shift would validate the bull thesis and likely prompt a meaningful re-rating of the stock.
Risks remain, of course. Execution missteps could open the door for rivals like Microsoft to gain share, while macroeconomic headwinds and integration challenges from acquisitions could weigh on progress. Even so, given Salesforce’s entrenched CRM leadership, improving financial profile, and AI-driven opportunities, the Bullish case looks increasingly compelling.