Why I'm Still Not Buying Salesforce Stock

Core Viewpoint - Salesforce's business performance is strong, but the stock may not be an obvious buy due to concerns over stock-based compensation and the impact of AI on profit margins and pricing power [1][3][13]. Financial Performance - In Q3 of fiscal 2026, Salesforce reported a revenue increase of 9% year over year, reaching $10.3 billion, with free cash flow rising 22% to $2.2 billion [5]. - The company incurred $805 million in stock-based compensation expenses, approximately 8% of quarterly revenue, which is higher than Alphabet's 6% in 2025 [6][8]. Shareholder Returns - Salesforce returned $4.2 billion to shareholders in Q3, including $3.8 billion in share repurchases and $395 million in dividends, which is significant for a company with a market cap of about $170 billion [8]. AI Integration and Market Dynamics - Salesforce is heavily investing in AI, with its AI-based products showing promising results, such as Agentforce and Data 360's annual recurring revenue reaching nearly $1.4 billion, up 114% year over year [11]. - The introduction of AI may increase competition and lower margins, creating uncertainty in the market [12][13]. Valuation Considerations - Despite a price-to-earnings ratio around 24, the stock is not considered cheap enough given the uncertain environment and revenue growth in the high single digits [13]. - There is a preference for more clarity on Salesforce's long-term profitability and market position before making investment decisions [14].