Key Points
Salesforce stock has been in a free fall this year, even though it recently posted strong earnings numbers.
Its guidance for the current year indicates that its growth rate is expected to slow down.
The stock has declined to a more modest valuation, which is more in line with the S&P 500 average.
Software stocks have been falling recently as investors worry about their futures due to the growing popularity of artificial intelligence (AI) and what it can do for businesses. One stock that's been performing particularly poorly is Salesforce (NYSE: CRM), which has ironically been positioning itself as a stock that should benefit from AI.
Salesforce stock has fallen 27% this year and is now near a three-year low. Could this be a great buying opportunity for growth investors, or are you better off steering clear of this troubled stock?
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Image source: Getty Images.
Strong quarterly numbers were not enough to give the stock a big boost
On Feb. 25, Salesforce reported its fourth-quarter earnings. For the three-month period ending Jan. 31, the company's revenue totaled $11.2 billion and rose by 12% year over year, slightly beating analyst expectations of $11.18 billion. Its adjusted per-share profit of $3.81 was also far above the $3.04 in per-share profit that Wall Street was expecting.
For the new fiscal year, which ends in January, Salesforce projects that its top line will rise by around 10% to 11%. It's a decent growth rate, but it may not be all that impressive for a company that has been routinely pumping up its opportunities related to AI and its Agentforce platform. While the stock did rise on the strong quarterly performance, it wasn't significant, especially given the decline that it's been on this year.
Larger questions loom over Salesforce stock
The lack of excitement around Salesforce's stock despite the tech company posting strong numbers points to a broader concern around the business, and that's whether its software will add enough value for customers to be in high demand. AI can help companies conduct sales and marketing analysis more efficiently, and lessen the need for Salesforce's pricey software. And AI can enable companies to offer similar types of services, making the field more competitive.
Although software stocks have been under the microscope this year, the question marks and concerns around Salesforce are not new; the stock is down 35% over the past 12 months. And even with the decline in value, it's still trading at around 26 times its trailing earnings (the S&P 500 average is a little under 25), offering a glimpse into just how overpriced it was in the past.
Salesforce isn't a cheap stock despite the sell-off this year, and with a slowing growth rate and plenty of uncertainty due to AI, I'd steer clear of it. While it may seem cheap, I wouldn't be surprised if it were to continue to fall in the weeks and months ahead.
Should you buy stock in Salesforce right now?
Before you buy stock in Salesforce, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Salesforce wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $523,599!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,118,640!*
Now, it’s worth noting Stock Advisor’s total average return is 951% — a market-crushing outperformance compared to 194% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of March 3, 2026.
David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Salesforce. The Motley Fool has a disclosure policy.
