Key Takeaways:
Salesforce borrowed $25 billion to fund its largest-ever accelerated share repurchase, while halving fiscal 2027 free-cash-flow growth guidance to 4-5 percent.
The company described the buyback as the largest accelerated share repurchase in history, funded through a $25 billion senior notes offering and a new $6 billion term loan to refinance existing debt.
The repurchase is part of a $50 billion authorization approved in February. Salesforce received an upfront delivery of 103 million shares, about 80 percent of the total, with final settlement expected in the fiscal third quarter. The company returned $27.5 billion to shareholders in a single quarter — $27.1 billion in buybacks plus $365 million in dividends — more than its free cash flow for the entire prior fiscal year. Diluted share count is down 10 percent from a year ago.
The debt-funded buyback comes as the stock trades near $196, about 27 percent below its 52-week high of $269.11. The interest burden on the new debt is why the company cut its fiscal 2027 operating and free-cash-flow growth outlook to 4-5 percent from 9-10 percent, a self-inflicted gap for a business growing revenue 11 percent.
Fiscal first-quarter revenue rose 13 percent year over year to $11.1 billion, helped by a $444 million contribution from the acquired Informatica business. Current remaining performance obligation, contracted revenue expected over the next 12 months, rose 14 percent to $33.6 billion. Management raised the midpoint of fiscal 2027 revenue guidance to $45.9 billion to $46.2 billion, about 11 percent growth.
Diluted earnings per share rose 52 percent year over year to $2.42, though much of the jump came from a swing in gains on strategic investments rather than operations. Operating cash flow rose 3 percent to $6.7 billion, and free cash flow rose 4 percent to $6.6 billion.
The buyback's upfront shares were delivered against Salesforce's roughly $194 close in mid-March, near where the stock trades today. The final tally will be set by the stock's average price over the life of the deal.
Analyst data compiled over the past month shows a Buy rating on the stock with an average price target of $272.56, a high of $475 and a low of $190. Some firms have trimmed targets, citing valuation pressures and weakness in certain product clouds, even as peers like Microsoft and Palantir face similar questions over AI-driven disruption in software.
The buyback makes each remaining share a bigger claim on Salesforce's growth, purchased at prices management considered low. Investors will watch the fiscal third-quarter settlement of the repurchase and whether the 11 percent revenue growth holds as the software sector weighs AI disruption.
This article is for informational purposes only and does not constitute investment advice.
