Salesforce Reports Q4 Results: Mixed Earnings & Outlook Impact Stock
Salesforce (NYSE:CRM) has published its Q4 fiscal 2025 results, which ended in January. The company reported sales of $9.99 billion and earnings per share of $2.78. While earnings exceeded the consensus estimate of $2.61 per share, revenue missed the anticipated $10.04 billion. This revenue shortfall is primarily due to slower adoption rates for its AI-driven Agentforce platform. Subsequently, Salesforce’s forward guidance did not meet market expectations, contributing to a decline in the stock price following the earnings announcement.
Since the start of 2024, CRM stock has delivered 17% returns. However, this performance lags behind the S&P 500 index, which has risen by 28%. Investors seeking a more stable performance than individual stocks could consider the High-Quality portfolio, which has outperformed the S&P 500 with returns exceeding 91% since its inception.
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Salesforce’s Q4 Performance Overview
In Q4, Salesforce generated revenues of $9.9 billion, reflecting a year-over-year growth of 7.6%. The company’s remaining performance obligations, which indicate revenue expected from existing contracts, reached $30.2 billion—a 9% increase year-over-year. Salesforce is indeed benefiting from integrating its AI system, Agentforce, across its products; however, adoption has plateaued as enterprises reevaluate their budgets in light of high interest rates and macroeconomic uncertainties.
Notably, Salesforce saw an increase in its adjusted operating margin by 170 basis points year-over-year to 33.1%. This rise in revenue combined with margin growth resulted in adjusted earnings per share of $2.78, showing a year-over-year growth of 21%. For Q1, Salesforce projects revenue between $9.71 billion and $9.76 billion, with adjusted earnings expected to be between $2.53 and $2.55. These projections fall short of market expectations for $9.9 billion revenue and $2.61 earnings per share.
Implications for CRM Stock
Given the disappointing performance and outlook, CRM stock is likely to trend lower in the near term. Analyzing the longer-term trajectory, CRM stock has experienced considerable volatility in its annual returns, marked by swings of 14% in 2021, -48% in 2022, 98% in 2023, and 28% in 2024.
In contrast, the Trefis High Quality (HQ) Portfolio, which contains 30 stocks, has shown much less volatility and has comfortably outperformed the S&P 500 over the past four years. This relative stability highlights the HQ Portfolio’s ability to deliver superior returns with less accompanying risk.
As macroeconomic uncertainties continue, including ongoing trade tensions and discussions about rate cuts, CRM may face a similar underperformance scenario as experienced in 2021 and 2022 relative to the S&P 500 in the next year. However, there is potential for growth moving forward as we plan to update our Salesforce model in response to the latest results.
Currently, at a pre-market price of around $295, CRM stock is trading at roughly 28 times trailing earnings of $10.20 per share, which is below its two-year average P/E ratio of approximately 32. This valuation compression stems from a cautious outlook and slower Agentforce adoption, yet these concerns might already reflect the current stock price. As a result, we see potential for upside from the $295 mark. Furthermore, the company’s profitability is improving, with a 250 basis point increase in 2024 and a management target of an additional 100 basis point improvement in 2025.
While opportunities for growth exist, it’s valuable to assess how Salesforce’s Peers perform against relevant industry metrics. Interested investors can explore further comparisons for companies across various sectors in our Peer Comparisons section.
| Returns | Feb 2025 MTD [1] |
Since start of 2024 [1] |
2017-25 Total [2] |
| CRM Return | -10% | 17% | 351% |
| S&P 500 Return | 1% | 28% | 173% |
| Trefis Reinforced Value Portfolio | -7% | 15% | 677% |
[1] Returns as of 2/27/2025
[2] Cumulative total returns since the end of 2016
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
