Is Salesforce Stock a Buy After a Strong Earnings Report?

Core Viewpoint - Salesforce reported strong fiscal fourth-quarter results with revenue and adjusted earnings per share exceeding analysts' expectations, alongside a $50 billion share repurchase authorization [1][2] Financial Performance - Total fiscal 2026 revenue increased by 10% year over year to $41.5 billion, with Q4 revenue growth accelerating to 10% on a constant-currency basis from 8% in the previous quarter [4] - Operating cash flow for fiscal 2026 rose by 15% to $15.0 billion, while free cash flow increased by 16% to $14.4 billion, reflecting strong cash generation capabilities [5] - Remaining performance obligations (RPO) reached $72.4 billion, up 14% year over year, with the current portion expected to be recognized over the next 12 months totaling $35.1 billion, up 16% [6] AI and Growth Drivers - The Agentforce suite, which includes autonomous AI agents, achieved $800 million in annual recurring revenue, marking a 169% year-over-year increase, indicating a positive impact from AI initiatives [7] - Despite strong RPO growth and Agentforce momentum, the company's guidance did not reflect a significant acceleration in overall growth trends [8] Guidance and Outlook - Management provided fiscal 2027 revenue guidance of $45.8 billion to $46.2 billion, implying approximately 11% growth at the midpoint, but this includes about three points from the acquisition of Informatica, suggesting underlying growth is in the high single digits [9] - For Q1 fiscal 2027, Salesforce expects revenue of $11.03 billion to $11.08 billion, representing a year-over-year increase of 12% to 13%, but this also includes contributions from Informatica [10] - Management anticipates organic revenue reacceleration in the second half of fiscal 2027, although the overall full-year guidance is viewed as disappointing [11] Valuation Considerations - The stock is currently trading at approximately 26 times earnings, reflecting expectations for high-single-digit to low-double-digit earnings-per-share growth in the coming years, which may not provide much room for error if growth slows [12][13] - Despite strong cash flow and an aggressive buyback program, the unimpressive growth outlook leads to a perception that the stock is fairly valued rather than undervalued [13]