Salesforce.com Inc (CRM) Common Stock USD0.001

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Salesforce reported fourth quarter revenue of $11.2bn ($11.2bn expected), up 10% ignoring currency moves. Within that, subscription and support revenue rose 11% to $10.7bn.

Underlying operating profit rose to $3.8bn ($3.8bn expected), up around 16% year on year, with continued cost discipline helping to support margins.

Free cash flow increased 39% to $5.3bn in the quarter. Net debt, including leases, was $7.6bn at the period end.

A quarterly dividend of $0.44 was announced, up 5.8%. The board also approved a new $50bn buyback programme, though there’s no fixed end date for execution.

For the year ahead, revenue guidance of $45.8–46.2bn implies 10–11% growth, including around three percentage points from the recently acquired Informatica.

The shares were down 4.0% in after-hours trading.

Our view

Salesforce delivered a solid quarter, with results broadly in line with expectations, but guidance raised a few question marks. Revenue growth was decent, margins continued to expand, and billings accelerated, offering some support to management’s view that growth should pick up in the second half of the year.

AI-related products remain in focus, with Agentforce and Data Cloud annual recurring revenue growing rapidly from a small base. Still, in a market preoccupied with disruption risk and slowing software demand, results were more reassuring than exciting.

Salesforce is a cloud platform giant that helps businesses manage customer relationships, sales, and marketing in one place. Over time, it has become deeply embedded in enterprise workflows, providing mission-critical tools across sales, service, marketing, and commerce.

There are two main levers for growth. The first is deeper penetration of its existing customer base through better bundling and more effective use of its data assets. There is a clear correlation between annual recurring revenue per customer and the number of cloud products adopted. The strategic aim is to pull customers deeper into the ecosystem, making switching increasingly difficult. With a broad, tightly integrated portfolio spanning sales, marketing, customer service, and analytics, Salesforce is well-positioned to do this.

Artificial intelligence is the second lever. The Agentforce platform allows customers to build AI agents that analyse data, make decisions, and act alongside human workers. Data Cloud helps unify fragmented datasets, creating a foundation for AI tools to operate more effectively. While management has provided more metrics to demonstrate traction, the revenue contribution remains modest, and it is too soon to draw firm conclusions.

Software stocks like Salesforce have been under sustained pressure, driven by fears that AI‑native competitors could replicate their services at a fraction of the cost. Although Salesforce benefits from strong integration, with deep customer relationships and trust, elements of its pricing and seat-based model are likely to face pressure. But that doesn’t mean Salesforce has no long-term future, as recent market moves might suggest.

Cost discipline has materially improved cash flow, and the balance sheet retains flexibility. This supports ongoing buybacks, a recently introduced dividend, and selective acquisitions, though none are guaranteed.

Salesforce offers a strong product suite and deep ties with its customers. Having come under pressure, there’s upside on offer if sentiment toward software improves more broadly. But it’s now a mature business, and AI success alone might not be enough to prevent slowing growth from becoming the new norm.

Environmental, social and governance (ESG) risk

The technology industry is low risk in terms of ESG, though some segments are more exposed, like Electronic Components (environmental risks) and data monetisers (social risks). Business ethics tend to be a material risk within the tech sector, ranging from anti-competitive practices to intellectual property rights. Historically the sector has flown under the radar when it comes to regulatory oversight, but more recently we’ve seen regulators keen to get involved given the high-profile of some of the “big tech” names. Other key risk drivers include labour relations, data privacy, product governance and resource use.

According to Sustainalytics, Salesforce’s management of material ESG issues is strong.

Salesforce’s nominating and corporate governance committee periodically reviews the company’s ESG initiatives, while its cybersecurity team conducts regular assessments and operates 24/7 for incident response. The company also conducts annual employee surveys, runs an apprenticeship program. There’s also an audit committee overseeing compliance and ethics, supported by a third-party hotline for anonymous reporting.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.

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