Salesforce Seen as One of Software’s Most Undervalued AI Stocks After Strong FY26 Results
Salesforce Seen as One of Software’s Most Undervalued AI Stocks After Strong FY26 Results
Salesforce, Inc. (NYSE: CRM) is drawing renewed attention from investors after a recent analysis argued that the company may be one of the most undervalued names in the software sector. The view is based on Salesforce’s strong cash flow, improving margins, large share buyback program, and growing artificial intelligence business through Agentforce.
The discussion follows Salesforce’s fiscal 2026 results, in which the company reported annual revenue of $41.5 billion, up 10% year over year. Salesforce also generated $14.4 billion in free cash flow, up 16%, while returning $14.3 billion to shareholders through buybacks and dividends.
Why Salesforce Is Being Called Undervalued
The main argument is that Salesforce’s market valuation does not fully reflect the strength of its business. The company remains one of the largest enterprise software platforms in the world, serving customers across sales, service, marketing, commerce, data, analytics, and collaboration. Yet its stock has traded at a discount compared with several other major software peers.
According to the Seeking Alpha analysis, Salesforce was viewed as trading at a sizable discount to the software sector’s forward earnings multiple, even though the company continues to deliver strong profitability, high gross margins, and major free cash flow.
AI Growth Becomes a Major Investor Focus
A key reason investors are watching Salesforce closely is its AI strategy. The company has been pushing Agentforce, its platform for AI agents that can help businesses automate tasks, improve customer service, support sales teams, and connect data across departments.
Salesforce describes itself as the “#1 AI CRM” and says its platform combines AI, data, and Customer 360 applications to help companies manage customer relationships more efficiently.
The recent analysis highlighted rapid growth in Agentforce-related annual recurring revenue, suggesting that Salesforce may be entering a stronger AI monetization phase. If customers adopt AI tools at scale, Salesforce could benefit from higher spending per customer and stronger long-term subscription growth.
Strong Cash Flow Supports the Bull Case
Salesforce’s free cash flow is one of the clearest reasons behind the positive investment case. In fiscal 2026, the company produced $14.4 billion in free cash flow. This gives Salesforce flexibility to invest in AI products, fund acquisitions, pay dividends, and continue share repurchases.
The company also announced a $50 billion share repurchase authorization, replacing unused previous authorization. This signals management’s confidence in Salesforce’s long-term value and gives the company a tool to reduce share count over time.
Margin Expansion Shows a More Disciplined Salesforce
Salesforce was once mainly valued as a fast-growing cloud software company. Today, investors are also judging it as a mature, cash-generating enterprise technology leader. Its fiscal 2026 non-GAAP operating margin reached 34.1%, showing that the company has become more disciplined on costs while still investing in growth.
This matters because software investors now care about both growth and profitability. A company that can grow revenue, improve margins, and produce large free cash flow may deserve a stronger valuation than the market is currently giving it.
Risks Still Remain for Salesforce
The bullish case is not without risk. Salesforce still needs to prove that AI products can create meaningful, lasting revenue growth. Some investors remain cautious because traditional software growth has slowed across the sector, and competition in enterprise AI is intense.
MarketWatch reported that Salesforce shares fell after its fiscal fourth-quarter report because some investors remained concerned about AI disruption and mixed performance in certain business areas, even though the company reported strong revenue and AI-related momentum.
Outlook
Salesforce now sits at an important point. The company has strong cash flow, a large customer base, expanding AI products, and a shareholder-friendly capital return plan. At the same time, investors want clearer evidence that Agentforce and other AI tools can reaccelerate organic growth.
For long-term investors, the debate is simple: if Salesforce can turn AI adoption into stronger revenue growth while maintaining high margins, the current valuation may look too low. But if AI revenue grows slower than expected, the stock may continue to trade at a discount.
This article is for news and information only. It is not financial advice, and investors should do their own research before making investment decisions.
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