VALUATION HIGHLIGHTS
- Cloud Based CRM Software constitutes 60% of the Trefis price estimate for Salesforce's stock.
- Cloud Software constitutes 37% of the Trefis price estimate for Salesforce's stock.
WHAT HAS CHANGED?
- CRM Stock Performance In Recent Years
- The changes in CRM stock over the recent years have been far from consistent. Returns for the stock were 14% in 2021, -48% in 2022, 98% in 2023, and 28% in 2024.
- In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, 24% in 2023, and 23% in 2024 - indicating that CRM underperformed the S&P in 2021 and 2022.
Note: Salesforce's FY'25 ended on January 31, 2025.
- Latest Earnings
The company posted total revenues of $10.0 billion in Q4 2025 - up 8% y-o-y. This was driven by an 8% increase in subscription & support revenues.
For FY 2025 (ended Jan 2025) the company's revenue was $37.9 billion, up 9% y-o-y. Subscription and support revenues were $35.7 billion, an increase of 10% y-o-y. FY25 GAAP Operating Margin was 19% and Non-GAAP Operating Margin was 33%.
- Large Acquisitions
In August 2019, Salesforce.com completed its acquisition of Tableau in an all-stock transaction worth $15.7 billion. Later, in Dec 2020, the company acquired Slack for $27.7 billion.
- AI Platform Einstein To Continue To Drive Strong Top-Line Growth
Salesforce.com is targeting revenue growth by capitalizing on the surge in demand for artificial intelligence and machine learning. Its AI platform, Einstein, is designed to generate valuable customer insights and revolutionize customer experiences. With over 6 billion daily predictions and insights, Einstein is poised to be a major driver of Salesforce.com's growth in the future
- Strategic Partnerships Will Boost Top-line Growth
Salesforce.com is actively strengthening its market position through key strategic moves. The company has enhanced its partnership with Google, improving the integration between Marketing Cloud and Google Analytics 360, which has been well-received by customers. Additionally, Commerce Cloud remains a top performer, and the acquisition of CloudCraze, a B2B commerce leader, enables Salesforce.com to offer a unified B2B and B2C platform. These actions are expected to drive revenue growth and increase the company's valuation in the short term
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
Below are key drivers of Salesforce.com's value that present opportunities for upside or downside to the current Trefis price estimate for Salesforce.com:
Cloud-based Customer Relationship Management (CRM) Software
- Cloud-Based CRM Software Revenue: Salesforce.com's CRM market share has increased at a brisk pace post the economic crash in 2008-09. We believe that Salesforce.com will benefit from the fast growth of the cloud computing CRM market. The favorable factors for this tremendous growth are speed and ease of implementation and low total cost of ownership thus boosting revenues from CRM Software. There could be an upside of about 15% to our estimate for Salesforce.com if its revenue increases at a faster rate to cross $60 billion by the end of the Trefis forecast period. On the other hand, there could be a 20% downside to our estimate for Salesforce.com if its revenue just reaches $30 billion by the end of the Trefis forecast period.
Cloud Software Revenue
- Salesforce's Cloud Software market revenue: The overall cloud-based software market is expected to grow at a fast rate. Salesforce.com continues to grow in this market organically, as well as through the acquisition route. It has launched a series of new cloud-based software applications like Chatter, Database.com, Data.com, Do.com, Desk.com, and Heroku. It also generates revenues from its application platform Salesforce1 and marketplace AppExchange. The segment revenues stand at just above $13 billion in 2025. There could be a 10% upside if our estimate for Salesforce.com's Cloud Software revenue increases at a faster pace and reaches $37 billion by the end of the forecast period. However, we believe Salesforce needs to pursue an inorganic growth strategy to be able to attain that.
For additional details, select a driver above or select a division from the interactive Trefis split for Salesforce.com at the top of the page.
BUSINESS SUMMARY
Salesforce.com specializes in providing customer relationship management (CRM) software solutions, encompassing sales and customer service tools, along with cloud-based application, database, and platform services. These solutions empower businesses to effectively manage customer data, improve customer service, and drive sales growth. As a pioneer in cloud-based delivery, Salesforce.com delivers its software remotely via the Internet.
Cloud-based CRM software
Salesforce.com delivers its software through the cloud, eliminating the need for on-site installations or server maintenance. Customers access online software with minimal implementation efforts. Revenue is primarily generated through subscription and support fees for these applications, which facilitate efficient data management and optimization across various business functions like sales, marketing, and customer service. As a leading provider of cloud-based application services, over 94% of Salesforce.com's revenue comes from subscription and support fees.
Other cloud based software
Beyond its core CRM offerings, Salesforce.com is strategically positioned to capitalize on the growing adoption of cloud-based solutions across corporate IT departments. As businesses shift away from traditional hardware and on-premise software, Salesforce.com aims to provide a comprehensive suite of cloud services, encompassing SaaS, PaaS, and IaaS. This expansion includes Force.com, an application development platform, and AppExchange, an application marketplace.
Furthermore, Salesforce.com has introduced a range of cloud-based applications and services, such as Chatter, Database.com, Data.com, Desk.com, Heroku, and Radian6. The acquisition of ExactTarget further solidified its commitment to becoming a complete cloud-based provider for all industries.
SOURCES OF VALUE
Cloud-Based Customer Software is Salesforce.com's core and most valuable business. The division's value depends heavily on three main factors:
1. Growth in the size of the CRM Software Market
The CRM software market consists of two types of software: (1) On-Premise Software, and (2) On-Demand (Cloud-Based) Software.
- On-Premise Software is the traditional enterprise software model, which requires each customer to install, configure, manage, and maintain the software on their in-house hardware.
- On-Demand (Cloud-Based) Software is delivered remotely over the Internet on an as-needed basis with little or no implementation services required and without the need to install and manage third-party software in-house.
The overall CRM market has rapidly grown over the years. Salesforce.com has been the undisputed market leader for many years now and currently commands around 21-22% of the market share, which is more than double that of the nearest competitor.
2. Salesforce.com's Growing Share in the CRM Software Market
Salesforce.com has been increasing its share in the CRM market at a consistent rate for the last few years. This growth is attributable in large part to the shift from on-premise CRM software to cloud-based CRM software globally from IT enterprises, which benefits Salesforce.com. Going forward, we expect Salesforce to continue with its strategy of investing heavily in sales & marketing and R&D activities to support a strong, double-digit top-line growth rate.
3. Cloud-based software suites that complement its CRM offering
Salesforce's additional offerings comprising development tools and data management suites provide a holistic product portfolio for small businesses and should complement the company's strong top-line growth rate in the future.
KEY TRENDS
On-going Shift to Software-as-a-Service (SaaS)
Software as a Service (SaaS) offers businesses online access to software through a subscription model, where they pay only for the features they use. This cost-effective approach is particularly beneficial for small and medium enterprises with limited IT budgets. Since the software is hosted on the service provider's servers, businesses eliminate the need for costly software purchases and implementations. We anticipate a continued rise in SaaS adoption.
Corporate Confidence in Data Security for Software-as-a-Service Applications
While large enterprises often hesitate to adopt cloud services due to data security concerns—with 75% fearing breaches, according to GTRA research—the pressure to reduce costs is driving a shift towards SaaS deployments. Despite concerns about data residing outside their control, the elimination of hefty hardware costs is proving compelling. Consequently, we anticipate a broader adoption of SaaS across various industries.
