Salesforce launches record $25B buyback in confidence move
Accelerated share repurchase immediately delivers 103 million shares, representing 11% of outstanding stock
Salesforce shares jumped more than 2% on Monday after the cloud software giant launched the largest accelerated share repurchase in history, delivering 103 million shares immediately in a $25 billion bet on its own future.
The San Francisco-based company completed the prepayment for the accelerated share repurchase, receiving an initial delivery of approximately 103 million shares—or about 11% of outstanding stock—representing roughly 80% of the total shares expected to be repurchased under the program. The move represents half of a previously authorized $50 billion share repurchase authorization.
"We are aggressively repurchasing shares because we are so confident in the future of Salesforce," chief executive Marc Benioff said in a statement accompanying the announcement. Final settlement for the accelerated share repurchase is anticipated in the third or fourth quarter of Salesforce's fiscal year 2027.
The buyback is being funded through a $25 billion senior notes offering completed earlier this month, with maturities ranging from 2028 to 2066 and interest rates between 4.500% and 6.900%. The company's decision to take on debt for share repurchases prompted S&P Global Ratings to revise Salesforce's credit outlook from "stable" to "negative" on March 10, though the ratings firm affirmed the company's 'A+' issuer credit rating.
Salesforce stock, which has traded below its 200-day moving average of $242.73, rose 2.5% to $197.57 in Monday afternoon trading. The shares remain well below their 52-week high of $294.59, hit during the broader market rally in artificial intelligence-related stocks last year.
The accelerated share repurchase represents a significant shift in capital allocation strategy for Salesforce, which spent $27.7 billion on acquisitions in fiscal 2022, including the $15.7 billion purchase of workplace messaging platform Slack. The company has faced pressure from activist investors to improve operational efficiency and return more capital to shareholders following a period of aggressive expansion.
Analysts at D.A. Davidson expressed skepticism about the optimal use of capital, suggesting that strategic acquisitions in artificial intelligence might offer greater long-term shareholder value than buybacks at current valuations. However, the broader analyst community maintains a positive outlook, with a consensus "Buy" rating and an average price target of $279.74, implying more than 40% potential upside from current levels.
The buyback announcement comes as Salesforce faces intensifying competition in the AI arena from both established tech giants and emerging startups. The company has been investing heavily in its Einstein AI platform and integrating artificial intelligence capabilities across its customer relationship management suite, even as growth rates have moderated from the pandemic-era surge.
With approximately $41.5 billion in trailing twelve-month revenue and a market capitalization of $180.7 billion, Salesforce currently trades at about 24.7 times forward earnings. The company's profit margin stands at 18%, with quarterly revenue growth of 12.1% year-over-year.
The accelerated share repurchase program is expected to provide immediate earnings per share accretion by reducing the company's outstanding share count by roughly 11%. However, the increased leverage from the debt financing has raised questions among some investors about the balance between returning capital to shareholders and maintaining financial flexibility for strategic investments in artificial intelligence and other growth initiatives.
Salesforce will report its fiscal fourth quarter earnings next month, when investors will be looking for updates on the company's AI product roadmap and integration strategy following the recent leadership changes in its product division.