Salesforce Borrows $25 Billion to Buy Back Its Own Stock. Wall Street Is Worried

Salesforce announced a $25 billion debt-funded stock buyback following Q1 FY27 earnings that beat revenue expectations but disappointed on cash flow guidance. The enterprise software giant is borrowing to repurchase shares, a strategy that concerns Wall Street analysts evaluating whether AI-driven growth can justify the aggressive capital allocation.

The stock trades at $177.51, down from its potential. Barclays downgraded its price target by 6.3% to $236, signaling reduced confidence in the company's ability to sustain growth while servicing debt. Jefferies maintains a more optimistic $250 target, but the divergence between analyst positions reflects genuine uncertainty about execution. The stock is testing upper trendline resistance as investors debate the trade-off between near-term shareholder returns and long-term financial flexibility.

The core issue is simple. Salesforce reduced its free cash flow guidance, constraining the capital available for operations, research, and debt service. Taking on $25 billion in debt to fund buybacks reverses the traditional playbook: companies typically use excess cash to reward shareholders, not borrow to do so. This move signals either confidence that AI momentum justifies the debt load or pressure from activist investors demanding capital returns.

Salesforce's AI strategy centers on Einstein, its platform for embedding AI across CRM workflows. If AI adoption accelerates subscription revenue and margins expand, the debt becomes manageable. If growth stalls, the company faces pressure to service obligations while investing in product development. Competitors including Microsoft, Oracle, and SAP are also racing to integrate AI into enterprise software, making differentiation critical.

The market's reaction reveals skepticism that Salesforce can deliver on both fronts simultaneously. Borrowing $25 billion shifts risk from shareholders to creditors, betting that operating leverage justifies the move. With Barclays cutting estimates and the stock testing resistance, investors are pricing in a more cautious scenario where AI momentum proves insufficient to offset weakening cash generation. The next two quarters will determine whether this buyback becomes a smart capital deployment or a warning sign of strategic miscalculation