With a 20% decline year-to-date (YTD), Salesforce stock (NYSE:CRM) has notably lagged behind the broader S&P 500 index, which is up 4%. This significant underperformance is primarily linked to increasing worries about slowing growth and the company’s competitive stance in critical areas such as AI. Nevertheless, if we examine a longer timeframe, CRM stock has doubled since early 2023, driven by three main factors:
- A 46% surge in its revenues, increasing from $26.5 billion in 2022 to $38.6 billion currently;
- A 39% rise in the Price-to-Sales (P/S) ratio, escalating from 4.9x to 6.7x; and
- A 0.4% reduction in total shares outstanding, supported by approximately $22 billion in share repurchases since 2022.
We’ll explore these drivers in detail. While CRM stock has generated remarkable returns, if you are looking for strong growth combined with lower volatility, you may want to consider the High Quality portfolio, which has surpassed the S&P 500 with returns exceeding 91% since inception. Additionally, take a look at – BigBear.ai: What’s Happening With BBAI Stock?
What’s Behind The Revenue Growth?
Salesforce’s revenue has exhibited consistent growth, rising 46% from $26.5 billion in 2022 to $38.6 billion over the past twelve months. While growth has slowed recently compared to historical rates, this expansion has been fueled by several key structural factors:
- AI and Agentforce Platform: Salesforce’s bold initiative into agentic AI (systems that can function autonomously) is showing early promise, with over 8,000 Agentforce deals finalized since October last year, of which 3,000 were added just in the first quarter of fiscal 2026 (fiscal year ends in January). The company has positioned AI agents as the next step in customer relationship management.
- Data Cloud Expansion: The Data Cloud and AI segment has emerged as a notable growth driver, generating $900 million in annual recurring revenue, a nearly 120% year-over-year increase. Data Cloud handled 50 trillion records in fiscal 2025 — double the amount from the previous year — underscoring its essential role in supporting AI capabilities.
- Subscription Model Resilience: The core subscription and support revenue continues to offer stability. The company maintains a solid foundation with a current remaining performance obligation of $29.6 billion, reflecting a 12% year-over-year increase.
What’s Driving The Valuation Higher For CRM Stock?
Salesforce’s price-to-sales ratio has increased significantly from 4.9 times trailing revenues in 2022 to 6.7 times now, indicating a 39% rise. For further insights, see Salesforce’s Valuation Ratios. This expansion in multiple reflects several key market dynamics and strategic positioning factors:
- AI Transformation Premium: The market is rewarding Salesforce’s assertive shift toward AI-powered services, especially with Agentforce positioning the company at the leading edge of the “agentic AI” revolution.
- Pricing Power and Revenue Quality: Salesforce’s capacity to implement a 6% price increase across its product suite in 2025 while introducing AI capabilities showcases strong pricing power and customer loyalty. This price increase was announced this month and will take effect on August 1.
- Market Leadership in Enterprise AI: As the adoption of enterprise AI accelerates, Salesforce’s dominance as the leading CRM platform gives it unique advantages in deploying AI agents across customer workflows.
- Strategic M&A and Platform Expansion: The $8 billion acquisition of Informatica exemplifies Salesforce’s commitment to developing an all-encompassing AI-powered data platform. This type of strategic expansion, combined with the rapid growth of the Data Cloud, positions the company to capture a larger share of enterprise spending and justifies premium valuations relative to single-point solutions.
The expansion in multiples signifies investor confidence that Salesforce can adeptly navigate the AI transformation and emerge with a stronger competitive position, despite short-term growth challenges.
But What Next? Is CRM Stock A Buy At $270?
Trading close to $270, CRM’s P/S ratio of 6.7x is below its three-year average of 8.6x. Some of this discrepancy can be attributed to challenges from maturing markets and intensified competition in the CRM field, which accounts for the relatively modest growth trajectory and recent stock performance concerns.
Nonetheless, we believe Salesforce’s valuation has room for further growth, bolstered by its early leadership in agentic AI promoting widespread “digital labor” adoption. In addition, the transition to permanent enterprise AI budgets favoring integrated platforms, untapped potential in the small and medium business market, and margin growth through AI-driven automation could enhance its valuation. Salesforce’s operating margin has surged tenfold, rising from only 2.1% in 2022 to 20.5% now. Even when considering the adjusted net income margin, it has increased by 50% over this period to 26% currently. The recent price hikes will further support this margin growth. We estimate Salesforce’s valuation to be $360 per share, indicating a significant 30% upside potential.
But There Are Risks
Despite the positive outlook, risks persist. During the inflation-driven downturn of 2022, CRM stock plummeted 59%, falling from a peak of $310 in November 2021 to $128 by December 2022—more than the S&P 500’s 25% drop. Though it rebounded to pre-crisis levels by December 2024, a subsequent sell-off took place earlier this year amid trade tensions, in which CRM fell nearly 35%, exceeding the 19% decline in the S&P 500. For additional information, refer to our Buy or Sell Salesforce Stock dashboard.
Beyond macroeconomic concerns, Salesforce faces immediate challenges from increasing competition, particularly from Microsoft’s competing AI agents utilizing existing enterprise relationships. The company also contends with risks related to the effective execution of AI transformation, particularly concerning customer adoption, their readiness to pay premium prices for AI features, and the ongoing difficulties of customization and implementation complexity. That’s why we use a risk-adjusted approach in constructing the 30-stock Trefis High Quality (HQ) Portfolio, which has consistently outperformed the S&P 500 over the last four years. Why? HQ Portfolio companies provide better returns with lower risk compared to the wider market, resulting in a smoother investment experience, as demonstrated in HQ Portfolio performance metrics.