Should Investors Buy the Post-Earnings Dip in Salesforce (CRM) Stock?

Despite posting favorable Q2 results after market hours on Wednesday, Salesforce CRM stock dropped as much as 12% in today’s trading session before paring back some of its early morning losses.

As the leading provider of on-demand customer relationship management software, investors may be wondering if now is an opportune time to buy Salesforce stock for a rebound, as CRM shares have struggled amid slower growth and lofty expectations.

To that point, Salesforce stock is now down nearly 30% YTD, but is still sitting on respectable gains of almost +60% in the last three years, although this has trailed the broader indexes and its Zacks Computer-Software Market’s gains of roughly +100%.

Salesforce's Favorable Q2 Results

Reporting Q2 sales of $10.23 billion, Salesforce’s top line expanded 10% from $9.32 billion in the comparative quarter and topped estimates of $10.13 billion. On the bottom line, Q2 earnings came in at $2.91 per share, increasing 13% from EPS of $2.56 a year ago and topping expectations of $2.77 by 5%.

Reassuringly, Salesforce highlighted that revenue from its AI and data product line was up 120% year over year, as there have been concerns about the company's ability to capitalize on artificial intelligence endeavors like other large-cap tech firms. Other noteworthy highlights included a 34.3% non-GAAP operating margin and an 11% spike in CRPO (Current Remaining Performance Obligation) at $29.4 billion.

Regarding its CRPO of deferred revenue and backlog, Salesforce disclosed that it inked deals with notable companies like Dell DELL, Marriott MAR, U.S. Bank USB, the U.S. Army, and Lululemon LULU.  

Salesforce Raises its Full-Year Guidance

While investors may have been looking for stronger guidance targets, Salesforce co-founder and CEO Marc Benioff did state the company is on track to close out its current fiscal year 2026 as a record year.  

Salesforce expects to finish FY26 with nearly $15 billion in operating cash flow, increasing its growth range forecast to 12%-13%. Furthermore, Salesforce raised the low end of its full-year revenue guidance to between $41.1 billion-$41.3 billion, which would reflect approximately 8.5%-9% growth, with full-year non-GAAP operating margin expectations raised 10 basis points to 34.1%.

Salesforce’s Reasonable P/E Valuation

Although most of its growth metrics have slowed toward the single digits, Salesforce stock is trading at its most reasonable valuation in recent years at 22X forward earnings. This is nicely beneath the benchmark S&P 500’s 24X forward earnings multiple and its Zacks Computer-Software Industry average of 25X.

More intriguing is that CRM shares are trading at a 43% discount to its 3-year median of 39X forward earnings and are well below a high of 75X during this period.

Conclusion & Final Thoughts

Investing in Salesforce stock has become more attractive after showcasing its ability to capitalize on AI and potentially fend off emerging customer relationship management software competitors like Microsoft MSFT. That said, there may still be better buying opportunities ahead, but Salesforce stock is starting to offer sound value at current levels.

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This article originally published on Zacks Investment Research (zacks.com).

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