We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Should You Buy, Sell or Hold Salesforce Stock After Q3 Earnings?
Read MoreHide Full Article
Salesforce, Inc. (CRM - Free Report) delivered a mixed set of third-quarter fiscal 2025 results, with revenues surpassing expectations but earnings per share (EPS) falling slightly short. Despite this, the company raised its full-year revenue guidance, which buoyed investor confidence.
Amid near-term challenges and long-term opportunities, here’s why holding Salesforce stock may be the right decision for now.
Salesforce’s Q3 Results: A Mixed Bag
Salesforce reported revenues of $9.41 billion, an 8% year-over-year increase that beat the Zacks Consensus Estimate of $9.34 billion. This growth highlights Salesforce’s ability to navigate macroeconomic headwinds, reflecting sustained demand for its customer relationship management and cloud solutions. However, its non-GAAP EPS of $2.41 missed the consensus estimate of $2.43, marking a slight setback.
While the Subscription and Support segment, which accounts for 94% of total revenues, grew by 9% year over year to $8.88 billion, the Professional Services segment declined by 2.4% to $565 million. This decline in the Professional Services segment highlights a slowdown in large-scale transformation projects as enterprises tighten budgets.
Despite mixed third-quarter results, this enterprise cloud computing solution provider’s shares soared 11% on Wednesday. Year to date, the stock has rallied 39.8%, outperforming the Zacks Computer – Software industry’s return of 18.9%. It has also exceeded other peers in the space, including Microsoft Corporation (MSFT - Free Report) , Intuit Inc. (INTU - Free Report) and Adobe Inc. (ADBE - Free Report) . MSFT and INTU stocks have gained 16.3% and 4.8%, respectively, while ADBE has declined 10.1% year-to-date.
YTD Price Return Performance
Image Source: Zacks Investment Research
Short-Term Challenges Weighing on CRM Stock
Salesforce faces several near-term challenges that have impacted its growth trajectory. Revenue growth has decelerated compared to the company’s historical double-digit expansion, reflecting a cautious spending environment among enterprises. Economic uncertainty and geopolitical pressures have led businesses to defer large-scale IT projects, affecting Salesforce’s revenue growth.
This deceleration in revenue growth underscores how enterprises are opting for smaller, more focused initiatives rather than committing to multi-year transformation deals. Foreign exchange headwinds and competitive pressures from rivals like Microsoft and Oracle add to Salesforce’s near-term hurdles.
Salesforce’s current valuation raises concerns. The stock trades at high multiples relative to its earnings and revenues. CRM stock is currently trading at 33.53X forward 12-month earnings compared with 32.94X for the sector. Similarly, it trades at 8.64X forward 12-month sales compared with the sector’s 8X. These elevated valuations indicate that a lot of future growth is already priced into the stock, leaving it vulnerable to any negative news or earnings misses.
Image Source: Zacks Investment Research
Why Holding Salesforce Stock Makes Sense
Despite these challenges, Salesforce’s robust fundamentals and strategic initiatives position it as a strong hold. Its core cloud platforms — Sales Cloud and Service Cloud — continue to perform well, posting 11% and 10% year-over-year revenue growth, respectively. These platforms remain central to Salesforce’s value proposition as businesses prioritize customer engagement and operational efficiency.
Generative artificial intelligence (AI) has emerged as a game-changer for Salesforce. The company’s AI-driven tools, such as Salesforce Einstein and Data Cloud, have gained significant traction, enabling customers to enhance productivity and decision-making. As generative AI adoption accelerates across industries, Salesforce’s ability to embed AI across its product portfolio positions it as a leader in this transformative market.
Profitability remains another strong suit for Salesforce. In the third quarter, the company’s non-GAAP gross margin improved by 200 basis points to 81%, while its operating margin expanded by 190 basis points to 33.1%. These improvements were driven by cost optimization measures, including workforce reductions and office space consolidation. Salesforce’s focus on cost discipline ensures it can sustain profitability even amid macroeconomic uncertainties.
Salesforce slightly raised the low end of its full-year fiscal 2025 revenue guidance to the $37.8-$38 billion range, up from the previous range of $37.7-$38 billion. This reflects management’s confidence in the company’s ability to sustain demand. Although EPS guidance was slightly lowered to the $9.98-$10.03 band, the projected operating margin of 32.9% underscores Salesforce’s commitment to balancing growth with profitability.
The Zacks Consensus Estimate for fiscal 2025 and 2026 revenues and earnings depict continued growth for the company despite ongoing macroeconomic uncertainties.
Image Source: Zacks Investment Research
Conclusion: Hold Salesforce Stock for Now
Salesforce’s investments in generative AI and improved profitability highlight its potential to navigate short-term challenges while positioning itself for long-term success. While decelerating revenue growth and economic uncertainty remain concerns, the company’s strategic focus on AI innovation and disciplined cost management offer reasons to stay invested.
For investors seeking exposure to a market leader in cloud solutions and customer relationship management software, holding Salesforce stock allows participation in its future growth while mitigating near-term risks. CRM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Should You Buy, Sell or Hold Salesforce Stock After Q3 Earnings?
Salesforce, Inc. (CRM - Free Report) delivered a mixed set of third-quarter fiscal 2025 results, with revenues surpassing expectations but earnings per share (EPS) falling slightly short. Despite this, the company raised its full-year revenue guidance, which buoyed investor confidence.
Amid near-term challenges and long-term opportunities, here’s why holding Salesforce stock may be the right decision for now.
Salesforce’s Q3 Results: A Mixed Bag
Salesforce reported revenues of $9.41 billion, an 8% year-over-year increase that beat the Zacks Consensus Estimate of $9.34 billion. This growth highlights Salesforce’s ability to navigate macroeconomic headwinds, reflecting sustained demand for its customer relationship management and cloud solutions. However, its non-GAAP EPS of $2.41 missed the consensus estimate of $2.43, marking a slight setback.
While the Subscription and Support segment, which accounts for 94% of total revenues, grew by 9% year over year to $8.88 billion, the Professional Services segment declined by 2.4% to $565 million. This decline in the Professional Services segment highlights a slowdown in large-scale transformation projects as enterprises tighten budgets.
Despite mixed third-quarter results, this enterprise cloud computing solution provider’s shares soared 11% on Wednesday. Year to date, the stock has rallied 39.8%, outperforming the Zacks Computer – Software industry’s return of 18.9%. It has also exceeded other peers in the space, including Microsoft Corporation (MSFT - Free Report) , Intuit Inc. (INTU - Free Report) and Adobe Inc. (ADBE - Free Report) . MSFT and INTU stocks have gained 16.3% and 4.8%, respectively, while ADBE has declined 10.1% year-to-date.
YTD Price Return Performance
Image Source: Zacks Investment Research
Short-Term Challenges Weighing on CRM Stock
Salesforce faces several near-term challenges that have impacted its growth trajectory. Revenue growth has decelerated compared to the company’s historical double-digit expansion, reflecting a cautious spending environment among enterprises. Economic uncertainty and geopolitical pressures have led businesses to defer large-scale IT projects, affecting Salesforce’s revenue growth.
This deceleration in revenue growth underscores how enterprises are opting for smaller, more focused initiatives rather than committing to multi-year transformation deals. Foreign exchange headwinds and competitive pressures from rivals like Microsoft and Oracle add to Salesforce’s near-term hurdles.
Salesforce’s current valuation raises concerns. The stock trades at high multiples relative to its earnings and revenues. CRM stock is currently trading at 33.53X forward 12-month earnings compared with 32.94X for the sector. Similarly, it trades at 8.64X forward 12-month sales compared with the sector’s 8X. These elevated valuations indicate that a lot of future growth is already priced into the stock, leaving it vulnerable to any negative news or earnings misses.
Image Source: Zacks Investment Research
Why Holding Salesforce Stock Makes Sense
Despite these challenges, Salesforce’s robust fundamentals and strategic initiatives position it as a strong hold. Its core cloud platforms — Sales Cloud and Service Cloud — continue to perform well, posting 11% and 10% year-over-year revenue growth, respectively. These platforms remain central to Salesforce’s value proposition as businesses prioritize customer engagement and operational efficiency.
Generative artificial intelligence (AI) has emerged as a game-changer for Salesforce. The company’s AI-driven tools, such as Salesforce Einstein and Data Cloud, have gained significant traction, enabling customers to enhance productivity and decision-making. As generative AI adoption accelerates across industries, Salesforce’s ability to embed AI across its product portfolio positions it as a leader in this transformative market.
Profitability remains another strong suit for Salesforce. In the third quarter, the company’s non-GAAP gross margin improved by 200 basis points to 81%, while its operating margin expanded by 190 basis points to 33.1%. These improvements were driven by cost optimization measures, including workforce reductions and office space consolidation. Salesforce’s focus on cost discipline ensures it can sustain profitability even amid macroeconomic uncertainties.
Salesforce slightly raised the low end of its full-year fiscal 2025 revenue guidance to the $37.8-$38 billion range, up from the previous range of $37.7-$38 billion. This reflects management’s confidence in the company’s ability to sustain demand. Although EPS guidance was slightly lowered to the $9.98-$10.03 band, the projected operating margin of 32.9% underscores Salesforce’s commitment to balancing growth with profitability.
The Zacks Consensus Estimate for fiscal 2025 and 2026 revenues and earnings depict continued growth for the company despite ongoing macroeconomic uncertainties.
Image Source: Zacks Investment Research
Conclusion: Hold Salesforce Stock for Now
Salesforce’s investments in generative AI and improved profitability highlight its potential to navigate short-term challenges while positioning itself for long-term success. While decelerating revenue growth and economic uncertainty remain concerns, the company’s strategic focus on AI innovation and disciplined cost management offer reasons to stay invested.
For investors seeking exposure to a market leader in cloud solutions and customer relationship management software, holding Salesforce stock allows participation in its future growth while mitigating near-term risks. CRM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.