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Salesforce (NYSE: CRM) posted its latest earnings report on Aug. 28. In the second quarter of fiscal 2025, which ended on July 31, the cloud software giant's revenue rose 8% year over year to $9.33 billion and exceeded analysts' estimates by $100 million. Its adjusted earnings per share ( EPS ) grew 21% to $2.56 and cleared the consensus forecast by $0.20.

Salesforce's growth rates seem healthy, but its stock remains down 2% for the year. Let's see if it's worth buying right now.

Salesforce's growth is still slowing

Salesforce is the world's leading provider of cloud-based customer relationship management (CRM) services. It also provides other cloud-based marketing, e-commerce, analytics, and enterprise collaboration services. In the first half of fiscal 2025, it generated 23% of its subscription and support revenue from its Sales Cloud, 26% from its Service Cloud, 20% from its Platform and Other Cloud, 15% from its Marketing and Commerce Cloud, and 16% from its Integration and Analytics Cloud. Here's how those five units fared (in constant currency terms) over the past two-and-a-half fiscal years.

Data source: Salesforce. Constant currency basis.

For many years, Salesforce expanded its ecosystem through big acquisitions. But after being besieged by activist investors in fiscal 2023 (which ended in January 2023), Salesforce paused its inorganic expansion and pivoted toward cutting costs and buying back more shares to boost its EPS. It also initiated its first dividend.

As Salesforce prioritized expanding its operating margins over growing its revenues, rising interest rates and other macro headwinds drove many companies to rein in their cloud spending. It also faced stiff competition from faster-growing CRM platforms like Microsoft 's (NASDAQ: MSFT) Dynamics and other diversified cloud software platforms.

For fiscal 2025, Salesforce expects its revenue to only grow 8% to 9%, which implies it will only grow at a high-single-digit rate throughout the second half of the year. Therefore, the recent expansion of its generative AI services (for analyzing its customer data and automating repetitive tasks) aren't meaningfully boosting its sales yet.

But its margins are still expanding

Salesforce's high-growth days might be over, but its layoffs and cost-cutting measures are boosting its margins. Its adjusted operating margin rose from 22.5% in fiscal 2023 to 30.5% in fiscal 2024, and it expects it to expand to 32.8% in fiscal 2025.

Its operating cash flow rose 41% in fiscal 2023 and 44% in fiscal 2024, and it anticipates another 23% to 25% growth in fiscal 2025. It also ramped up its buybacks from $4 billion in fiscal 2023 to $7.6 billion in fiscal 2024, and it repurchased another $6.5 billion in shares in the first half of fiscal 2025. It still has $11.9 billion left in its current buyback authorization.

Salesforce expects those rising margins and buybacks to boost its adjusted EPS by 22% to 23% for the full year. At $258 a share, its stock still looks reasonably valued at 26 times the midpoint of that forecast. Microsoft, which is expected to grow its earnings just 11% in its current fiscal year (which started in July), trades at 31 times forward earnings.

Is it the right tech stock to buy right now?

Salesforce's bottom-line improvements appeased its activist investors, but its long-term growth potential is murky. Its organic growth is underwhelming, and it can't aggressively expand through investments and acquisitions as long as it's so focused on cutting costs, increasing its operating cash flow, and buying back more shares.

In other words, there's a risk that Salesforce could become the next IBM (NYSE: IBM) -- the blue chip tech giant that focused so much on growing its EPS that its revenue growth stalled out for an entire decade. If that happens, Salesforce's EPS growth will decelerate, and it will be revalued as a slow-growth stock. For now, it doesn't make much sense to buy Salesforce's stock when there are so many better growth, value, and dividend stocks to choose from.

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