Salesforce: A Steady Tech Leader in Volatile Times
Chua Minghan (CFA), Deputy Head | HQ Dealing Team
Chua Minghan graduated from the National University of Singapore with a Bachelor’s degree in Economics. He is passionate about education and went on to get a post-grad Diploma in teaching. His vision is to educate clients to make informed decisions for their trading and investments.
Minghan enjoys learning fundamental analysis, technical analysis, and strives to use data analysis to improve his trading skills.
US markets experienced a downturn from mid-February to mid-March — a textbook correction of more than 10% from recent highs. April’s news of sweeping US tariffs exacerbated market sentiment. This was followed by a rebound in May, highlighting the underlying market volatility.
So, what can investors do in times of such uncertainty? Is it an opportune time to buy? And if so, what kind of business makes for a resilient investment?
In this article, we’ll delve into Salesforce, who they are, how they generate revenue, and how one might approach investing in the company moving forward.
In today’s intensely competitive business environment, data is king. Organisations that effectively leverage data can create outstanding customer experiences, build loyalty, and fuel growth. This creates a positive feedback loop, a virtuous cycle where high-quality data enhances customer insight, improves service delivery, and generates even more valuable data in return. However, when mismanaged, this cycle can become destructive. Poor data practices can lead to dissatisfied customers, diminished trust, and ultimately, declining revenues.
At the core of this data-driven transformation is Salesforce, the world’s leading provider of Customer Relationship Management (CRM) software. Salesforce equips businesses to gather, analyse, and utilise customer data, enabling them to deliver tailored experiences on a large scale.
Founded in 1999 by Marc Benioff and Parker Harris, Salesforce is headquartered in San Francisco, California. Listed on the NYSE under the ticker CRM, the company specialises in developing cloud-based enterprise software solutions focused on customer relationship management. Salesforce’s suite of products includes sales force automation, customer service and support, marketing automation, digital commerce, community engagement, collaboration tools, industry-specific solutions, and its proprietary Salesforce platform. It also offers a range of consulting, training, support, and advisory services to help clients maximise the value of their technology stack.
The Big Picture
According to Dogma Group, the customer relationship management (CRM) industry is expected to grow 13% from 2023 to 2032. Industry’s revenue is forecasted to exceed US$90 billion by 2025.
Source: Gartner
Salesforce ranks as the number one leader in both vision and execution, according to Gartner (above) and IDC (below). In times of uncertainty, it pays to be invested in market leaders and resilient businesses.
Source: Salesforce Investor Relations
How Salesforce Generates Revenue
Salesforce operates on a subscription-based revenue model, which provides predictable and recurring income. Here’s a breakdown of its revenue streams:
- Subscription and Support (makes up approximately 95% of revenue):
Salesforce charges customers a recurring fee for access to its cloud-based CRM platform - Professional Services (the remaining approximately 5% of revenue):
Salesforce offers consulting, implementation, and training services to help businesses optimise their use of the platform
Marc Benioff, Chair and CEO, Salesforce, notes:
“No company is better positioned than Salesforce to lead customers through the digital labor revolution. With our deeply unified platform, seamlessly integrating our Customer 360 Apps, Data Cloud and Agentforce, we’re already delivering unprecedented levels of productivity, efficiency and cost savings for thousands of companies.”
He added on further by saying:
“Our formula now really for our customers is this idea that we have these incredible Customer 360 apps. We have this incredible Data Cloud, and this incredible agentic platform. These are the 3 layers. But that it is a deeply unified platform, it’s a deeply unified platform, it’s just one piece of code, that’s what makes it so unique in this market.”
The infographic below provides a summary of how Salesforce conducts its business, highlighting its core processes, product offerings, and platform integration.
Source: Salesforce Blog
Profitability Insights
Source: Salesforce 1QFY26 Presentation
Above are the various subscription and support services that contribute to Salesforce’s 95% revenue.
Each component has recorded year-on-year growth in Q1 FY26.
Source: Salesforce Q1FY26 filing
Top Line Overview
- Total Revenue: US$9.8B (+8% Y/Y)
- Subscription & Support Revenue: US$9.3B (+8% Y/Y)
- Current Remaining Performance Obligation (cRPO): US$29.6B (+12% Y/Y)
As of Q1 FY26, Salesforce’s current remaining performance obligation (cRPO) stands at US$29.6 billion. This figure represents the amount of revenue Salesforce expects to recognise over the next 12 months, based on contracts already in place.
For comparison, in Q1 FY25, cRPO was US$26.4 billion — an increase of 12% year-on-year, highlighting continued customer demand and contract growth.
Source: Salesforce 1QFY26 Presentation
This is the latest earnings flow chart for Salesforce. Gross margin improved by 0.63%, operating margin increased by 1.05%, while net income margin declined by 1.11%. These indicators suggest that Salesforce is not only increasing its revenue but also managing costs effectively—demonstrating strong economies of scale.
Performance Review
Below is the guidance provided in the previous quarter and how Salesforce performed relative to its own expectations:
- Revenue: US$9.71 to US$9.76 billion
→ Actual: US$9.8 billion (beat by US$0.09 billion) - cRPO: US$29.0 billion
→ Actual: US$29.6 billion (beat by US$0.6 billion) - GAAP Earnings per Share (EPS): US$1.49 – US$1.51
→ Actual: US$1.59 (beat by US$0.08)
This demonstrates that Salesforce’s forecasting has been relatively accurate and that it outperformed expectations for Q1 FY26.
Next Quarter Outlook
At every earnings call, Salesforce presents guidance for the next quarter—in this case, Q2 FY26.
Note: If you’re unfamiliar with fiscal years, it’s worth noting that many companies use financial years that differ from the calendar year.
Source: Salesforce 1QFY26 Presentation
Above is the guidance given by Salesforce in their latest earnings call. Despite ongoing macroeconomic uncertainty, Salesforce remains confident in its ability to achieve growth in the next quarter
Valuation – What Is A Reasonable Price
So, what is considered a reasonable price?
According to the financial data from TradingView, Salesforce has grown its free cash flow by 27.52% over the past five years.
Source: www.tradingview.com
Assuming a continued free cash flow growth rate of 25%, the intrinsic value is estimated at US$337.
Source: www.tradingview.com
From a technical perspective, Salesforce’s share price is in a multi-year uptrend. There was a pullback to the lower portion of the uptrend channel, followed by a break below, largely attributed to the tariff-related news. Markets, being close to efficient, saw participants take advantage of the dip to accumulate shares in what they consider a fundamentally strong company.
Currently, price is finding some support at US$270 level. Short-term traders may take advantage of this price movement using leverage products such as CFDs. Long-term investors, on the other hand, may have already entered during the earlier dip caused by trade tensions, recognising it as a temporary discount on a quality business.
Source: www.tradingview.com
Conclusion
A 10% correction in the S&P 500 is a relatively rare occurrence and often presents an attractive opportunity to invest in solid companies at more favourable valuations.
In times of uncertainty, it is prudent to focus on businesses with a proven track record.
Salesforce remains a cornerstone of the CRM industry, empowering organisations to harness the power of data and deliver exceptional customer experiences. Its subscription-based model, focus on innovation, and strong ecosystem position it well for sustained growth.
By understanding Salesforce’s business fundamentals, industry relevance, and valuation metrics, we gain insight into why it continues to lead the way in the tech sector. Whether the data-driven cycle becomes virtuous or vicious will depend on how businesses like Salesforce evolve and innovate in a rapidly shifting world.
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