Salesforce
Short update
This week is especially busy, so I’ll keep my update brief. I recently increased my position in Salesforce (CRM) following the company’s Q1 fiscal 2026 earnings release. I took advantage of the market’s reaction to the earnings to add to my holdings. Below, I’ll share my rationale for using this opportunity to accumulate more shares.
Market reaction
The market had a mixed reaction to CRM’s earnings report. While the company’s operational and financial metrics were robust, CRM stock had already experienced a decline of about 17% since the beginning of the year as of late May, underperforming the S&P 500, which was up 1% over the same period. Following the earnings release, there was no immediate sharp rally in the stock price. Instead, the broader market context and recent underperformance appeared to temper enthusiasm. As of the latest available data, CRM shares were trading at $265.37, down from where the stock price traded before the earnings release.
I choose to buy when the sentiment is weak since that is when it’s cheap. In conclusion, I paid about $261 for the shares.
What I learned from the earnings report
CRM reported strong Q1 fiscal 2026 earnings, with revenue of $9.8 billion, up 8% year-over-year (YoY), solid operating margins, and a significant increase in current remaining performance obligations (RPO) of 12% YoY. The company also raised its full-year revenue guidance by $400 million to a high end of $41.3 billion and boosted non-GAAP earnings per share guidance.
Most pleasant, was CRM’s progress within Artificial Intelligence (AI).
Agentforce is crushing it!
CRM has transformed itself into a leader in enterprise AI. Central to this strategy is the rapid expansion of Agentforce and Data Cloud, which are now core drivers of CRM’s growth narrative. The earnings call highlighted that Agentforce has seen strong early traction, with over 8,000 engagements, half of which are paid customers, and a notable share of bookings stemming from existing clients expanding their usage, signaling robust platform stickiness and customer satisfaction.
Management emphasized that Data Cloud and AI solutions collectively surpassed $1 billion in annual recurring revenue, growing at an extraordinary rate of over 120% YoY. Nearly 60% of the company’s top 100 deals in the quarter included Data Cloud and AI, underscoring their growing importance to CRM’s product mix. The company’s “ADAM” framework—Agents, Data, Applications, and Metadata—was repeatedly referenced in the call as the foundation for its unified enterprise AI platform, positioning CRM to capitalize on the burgeoning market for agentic AI.
Much of the call focused on the recently announced Informatica acquisition, emphasizing its strategic alignment with the company’s broader vision and plans.
Informatica
CRM referenced the $8 billion in cash acquisition of Informatica as a pivotal move in its broader artificial intelligence strategy. Informatica, a leader in enterprise data management, brings advanced capabilities in data integration, governance, quality, and master data management—all essential for building reliable, scalable AI solutions. This combination addresses a critical gap in CRM’s data management stack, ensuring that the AI agents developed on its platform can access accurate, transparent, and context-rich data.
The acquisition will close early next year. According to CRM’s leadership, this deal positions the company to offer a comprehensive AI-ready data platform, supporting smarter, more personalized, and responsible AI-driven customer experiences.
Cheap
CRM trades with a free cash flow yield of 5% which is a tad cheaper than IBM and far cheaper than ServiceNow. I keep my fair value estimate of $375 per share, so the company is massively undervalued here. Last year, CRM returned $9,4 billion to shareholders in dividends and buybacks representing a total yield of approximately 3,5%.
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