Salesforce spent a record $27 billion on stock buybacks in a single quarter, funded partly by $25 billion in newly issued debt. The move comes as the stock trades near a historically low valuation after fears about AI's threat to the SaaS business model dragged shares down sharply.
Salesforce issued $25 billion worth of debt to accelerate its stock buybacks, pushing total repurchases to a record $27 billion in a single quarter. The company faces fears that generative AI could let businesses build their own software instead of paying for SaaS tools, a threat some have dubbed the "SaaSpocalypse."
Why Salesforce chose debt over equity
A business can fund itself with debt or by selling new stock. Debt carries a concrete cost, and the bonds Salesforce issued carry interest rates ranging from 4.5% to 6.7%. Issuing new shares is generally the better move when a stock is expensive, but Salesforce's management appears to view its own equity as an even costlier way to raise money right now.
That view lines up with the numbers. Salesforce shares had fallen nearly 60% from their high at the start of 2025 by mid-2026. The stock now trades at a historically low 14 times forward earnings, and management is betting that buying back stock at that valuation is a better use of capital than the interest payments will cost.
AI products are already showing momentum
Management is guiding for revenue acceleration in the back half of the year, driven by its AI products, Agentforce and Data 360, which let businesses build custom AI agents inside Salesforce's software. The combined annualized recurring revenue for the two products doubled year over year last quarter, and the number of tasks completed by AI agents on the platform accelerated sequentially.
Even if that growth slows, the company still aims to expand its profitability. Salesforce's long-term goal is an adjusted operating margin of around 40% by fiscal 2030, up from about 34% today.
Heavier debt load, bigger bet
The extra borrowing will weigh on free cash flow for some years because of the added interest payments. Still, management chose to front-load its $50 billion share-repurchase program rather than spread it out. It's impossible to know when the market will properly reflect Salesforce's value in its share price.
Source: The Motley Fool
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