Salesforce (CRM): Buy, Sell, or Hold Post Q3 Earnings?

Salesforce (CRM): Buy, Sell, or Hold Post Q3 Earnings?

Jabin Bastian

Mon, February 16, 2026 at 1:04 PM GMT+9 3 min read

In this article:

CRM

+2.31%

What a brutal six months it’s been for Salesforce. The stock has dropped 22.3% and now trades at $189.65, rattling many shareholders. This might have investors contemplating their next move.

Is there a buying opportunity in Salesforce, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is Salesforce Not Exciting?

Even though the stock has become cheaper, we’re cautious about Salesforce. Here are three reasons you should be careful with CRM and a stock we’d rather own.

1. Weak ARR Points to Soft Demand

While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.

Salesforce’s ARR came in at $38.9 billion in Q3, and over the last four quarters, its year-on-year growth averaged 9.1%. This performance was underwhelming and suggests that increasing competition is causing challenges in securing longer-term commitments.

Salesforce Annual Recurring Revenue

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Salesforce’s revenue to rise by 11.8%. While this projection suggests its newer products and services will spur better top-line performance, it is still below average for the sector.

3. Operating Margin Rising, Profits Up

While many software businesses point investors to their adjusted profits, which exclude stock-based compensation (SBC), we prefer GAAP operating margin because SBC is a legitimate expense used to attract and retain talent. This is one of the best measures of profitability because it shows how much money a company takes home after developing, marketing, and selling its products.

Analyzing the trend in its profitability, Salesforce’s operating margin rose by 1.7 percentage points over the last two years, as its sales growth gave it operating leverage. Its operating margin for the trailing 12 months was 20.5%.

Salesforce Trailing 12-Month Operating Margin (GAAP)

Final Judgment

Salesforce’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 3.9× forward price-to-sales (or $189.65 per share). This valuation multiple is fair, but we don’t have much faith in the company. We’re fairly confident there are better investments elsewhere. We’d recommend looking at our favorite semiconductor picks and shovels play.

Story Continues  

Stocks We Would Buy Instead of Salesforce

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.

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