Salesforce (NYSE: CRM) recently announced its Q4 fiscal 2025 results (fiscal year ending in January), reporting sales of $9.99 billion and earnings per share of $2.78. Although earnings exceeded consensus estimates of $2.61 per share, revenue missed the projected $10.04 billion target. This shortfall is primarily due to a slower-than-anticipated uptake of its AI-powered Agentforce platform. Additionally, the company’s forward-looking guidance fell short of market expectations, causing the stock price to decline after the earnings release.
CRM stock, which has delivered a 17% return since the beginning of 2024, has lagged behind the S&P 500 index that is up 28%. However, if you seek upside with less volatility than a single stock, consider the High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 91% since inception. Separately, Should You Buy AVGO Stock After A 7% Fall In Chip Sell-Off?
How Did Salesforce Perform in Q4?
Salesforce’s revenue of $9.9 billion in Q4 marks a 7.6% year-over-year increase. The company’s current remaining performance obligations—which represent future revenue from contracts not yet recognized—totaled $30.2 billion, up 9% year-over-year. Salesforce is benefiting from its AI system, Agentforce, and is progressively integrating AI capabilities across its offerings, which has driven higher adoption. Nevertheless, this adoption is growing more slowly than expected as enterprises reassess their spending amid higher interest rates and uncertain macroeconomic conditions.
In addition to revenue growth in Q4, Salesforce saw its adjusted operating margin rise by 170 basis points year-over-year to 33.1%. This combination of increased revenue and margin expansion produced adjusted earnings per share of $2.78, a 21% increase from the previous year. Looking ahead to Q1, the company expects revenue between $9.71 billion and $9.76 billion, with adjusted earnings per share ranging from $2.53 to $2.55. These projections are below the consensus estimates of $9.9 billion for revenue and $2.61 for earnings per share.
What Does This Mean for CRM Stock?
CRM stock saw lower levels following the disappointing performance and outlook. Even over a longer timeframe, its annual returns have been highly inconsistent and considerably more volatile than those of the S&P 500—the stock returned 14% in 2021, -48% in 2022, 98% in 2023, and 28% in 2024.
In contrast, the Trefis High Quality Portfolio, which comprises 30 stocks, exhibits significantly lower volatility. It has consistently outperformed the S&P 500 over the past four years. Why is that? Collectively, the stocks in the HQ Portfolio have delivered superior returns with less risk compared to the benchmark index, providing a smoother ride—as demonstrated by the HQ Portfolio performance metrics.
Considering the current uncertain macroeconomic environment—including potential rate cuts and ongoing trade wars—CRM might again face underperformance relative to the S&P, as it did in 2021 and 2022, over the next 12 months, or it could experience a robust rebound. Although we will soon update our model for Salesforce to incorporate the latest results, there appears to be potential for growth.
At its current price of approximately $295, CRM stock is trading at roughly 28x trailing earnings of $10.20 per share, which is below its two-year average P/E ratio of about 32x. Although this valuation compression may be attributed to a conservative outlook and slow Agentforce adoption, we believe these concerns are already reflected in the stock’s price. Consequently, we see potential upside from the $295 level. Investors should also note the company’s improving profitability, which increased by 250 basis points in 2024, with management projecting an additional 100 basis point improvement in 2025.
Although CRM may have room to grow, it is instructive to examine how Salesforce’s Peers perform on key metrics. You can also find additional valuable comparisons for companies across industries at Peer Comparisons.
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