Salesforce announced a $50 billion share buyback program Tuesday evening—one of the largest capital return commitments in tech history—and the market's response was unequivocal: shareholders dumped the stock, sending shares down 5% in extended trading.
The message from Wall Street is clear: we don't want your cash, we want growth.
The software giant reported fiscal fourth-quarter revenue of $10.03 billion, up 8% year-over-year but slightly below analyst estimates. More concerning was the company's guidance for the current quarter: revenue between $9.82 billion and $9.87 billion, at the low end of what the Street expected.
In a normal market environment, a $50 billion buyback would be celebrated—it represents nearly 20% of Salesforce's current market capitalization and signals management's confidence in the stock's value. But these aren't normal times for enterprise software. Investors want to see Salesforce investing in AI capabilities, not returning capital.
"The buyback is essentially an admission that they don't have better uses for the cash," said Dan Ives, managing director at Wedbush Securities. "When you're in the middle of an AI arms race and your growth is decelerating, shareholders want to see aggressive R&D spending, not financial engineering."
The numbers tell the story of a maturing business: Salesforce's revenue growth has decelerated from the 20%+ rates it posted during the pandemic to single digits today. Operating margin has improved to 30.5%, up from 18.7% two years ago, but that margin expansion comes largely from cost cuts and efficiency gains—not from innovative new products driving pricing power.
This is the mature company dilemma playing out in real time. Salesforce generates enormous free cash flow—roughly $10 billion annually—but lacks the explosive growth opportunities that would justify plowing all that cash back into the business. So management does what mature companies do: they return capital to shareholders through buybacks and dividends.
The problem is that Salesforce is competing against companies like Microsoft, which is integrating AI into every product, and upstarts building AI-native CRM tools from scratch. The market wants Salesforce to spend like it's in a fight for survival, not like it's a dividend aristocrat.
CEO Marc Benioff emphasized the company's AI initiatives on the earnings call, highlighting the success of Agentforce, Salesforce's autonomous AI agent platform. But the adoption numbers remain vague, and the revenue contribution is still small relative to the company's $40 billion annual run rate.
The $50 billion authorization gives Salesforce flexibility to buy back shares over multiple years, potentially supporting the stock price as growth moderates. But the 5% sell-off suggests investors would rather see that capital deployed differently—acquiring AI startups, building data centers for model training, or aggressively undercutting competitors on price to regain market share.
When a $50 billion capital return program doesn't excite investors, that's not a commentary on the size of the buyback—it's a commentary on the state of the business. The numbers don't lie, and right now they're saying Salesforce has a growth problem that financial engineering won't solve.
