TRADING CHEAT SHEET

• CRM – Salesforce
• Current P/E: under 13x  |  10-yr avg: ~45x
• Q1 FY2026 Revenue: $9.83B  (+8% YoY)
• Q1 Free Cash Flow: $6.3B
• Non-GAAP Operating Margin: 32.3%
• Full-year revenue guide: $41B+
• Key risk: Informatica integration, slowing top-line growth

• ADBE – Adobe
• Current P/E: ~10x  |  10-yr avg: ~30x
• Q1 FY2026 Revenue: $6.40B  (+12% YoY)
• Q1 Operating Cash Flow: $2.96B (Q1 record)
• Non-GAAP Operating Margin: 47.4%
• Morningstar fair value estimate: ~37% undervalued
• Key risk: AI image displacement vs. Firefly monetization ramp

Here is what I keep coming back to. The S&P North American Expanded Technology Software Index trades around 21 times forward earnings right now. That is roughly half its mid-2024 level. Fear about AI disruption, tighter enterprise budgets, and the slow bleed of the 2021 valuation bubble have compressed the whole sector. Most investors looked at that and moved on. What they may have missed is that not every name in that bucket deserves the same discount.

Two of them stand out. Both have long operating histories, strong and growing cash flow, and real AI products with actual adoption numbers behind them – not vaporware, not promises.

Start with Salesforce. Q1 fiscal 2026 revenue came in at $9.83 billion, up 8% year over year, beating estimates. Free cash flow hit $6.3 billion for the quarter. Non-GAAP operating margin was 32.3%. The remaining performance obligation – contracted future revenue already on the books – stood at $72.4 billion, up 14% year over year. Full-year guidance calls for $41 billion-plus in revenue and 10% to 11% operating cash flow growth. That is a stable, high-margin business with a locked-in revenue base.

And it trades at under 13 times estimated earnings. The 10-year average forward multiple is 45. That gap does not close on its own, but it also does not usually stay this wide forever for a company with this kind of cash generation.

The part people are skipping: Agentforce crossed 4,000 paid customers and $100 million in ARR within its first few quarters. Data Cloud and AI combined ARR surpassed $1 billion, growing over 120% year over year. Salesforce deployed Agentforce internally, reassigned 500 support workers, and reported $50 million in operational savings. That is the product working in the real world, not a demo.

Adobe is the harder sell right now, and I get why. The fear is straightforward – generative AI tools are eating into the stock image business and could eventually threaten Creative Cloud itself. That fear is not wrong. The standalone stock image segment did decline faster than expected last quarter. Management said so directly.

But here is the thing. Q1 fiscal 2026 revenue grew 12% year over year to $6.40 billion, ahead of the $6.28 billion consensus. Non-GAAP EPS of $6.06 was up 19%. Operating cash flow hit a Q1 record of $2.96 billion, up 19.2% year over year. Adobe has beaten revenue estimates for 12 consecutive quarters. Twelve. That is either a consistent business or the luckiest streak in software. Almost certainly the former.

Slight tangent, but it matters: Adobe did not just respond to generative AI – it shipped its own. Firefly is embedded across Creative Cloud, not bolted on afterward. The company is monetizing AI from inside a platform that 30 million professionals already rely on daily. That is a different position than most software vendors who are still figuring out where AI fits in their stack.

Morningstar rates it a wide moat stock and pegs shares at roughly 37% below fair value. A non-GAAP operating margin of 47%-plus with nearly $3 billion in quarterly cash flow at a 10x earnings multiple is an unusual combination. Not impossible to justify, but unusual.

Neither of these is a clean story. CRM faces real integration risk with the Informatica acquisition and revenue growth that has clearly decelerated from its peak years. ADBE has an open question about how fast Firefly monetization can offset the pressure on legacy image revenue. These are not problems that resolve in a single quarter.

What is harder to dismiss is the combination of factors that rarely line up this cleanly: a proven operating history across multiple market cycles, expanding cash flow, genuine AI product traction, and valuations sitting at or near decade lows. The market has treated both like the disruption is already happening at full speed. The actual earnings reports suggest otherwise.

Worth a look before the rest of the market figures that out.

– Trading Cheat Sheet