Salesforce Rides the AI Wave: Is Now the Time to Buy?
Enterprise software is facing scrutiny as investors assess the impact of artificial intelligence (AI). Yet, despite market headwinds, Salesforce (NYSE: CRM) is demonstrating resilience and positioning itself for a modern era of growth. Its share price has declined over 26.6% this year (as of March 18), but recent data suggests a potential turning point.
Strong Financial Performance Amidst Uncertainty
Salesforce’s fiscal 2026 revenue reached $41.5 billion, a 10% year-over-year increase. The company boasts a robust $72.4 billion in remaining performance obligations (RPO), with $35.1 billion expected within the next 12 months – a 16% year-over-year increase. This indicates continued success in securing long-term customer commitments, even amidst AI disruption concerns.
Agentforce: The Engine of AI-Driven Growth
A key driver of this growth is Salesforce’s Agentforce platform. Agentforce, combined with Data 360, has achieved $2.9 billion in annual recurring revenue (ARR), a remarkable 200% year-over-year increase. Agentforce alone contributes approximately $800 million to that ARR, growing at 169% year-over-year.
Upselling and Cross-Selling Fuel Expansion
Notably, over 60% of Agentforce and Data 360 bookings reach from existing customers. This demonstrates the effectiveness of Salesforce’s strategy to expand within its current client base. New bookings for premium AI products, like Agentforce One Edition and Agentforce for Apps, nearly tripled sequentially in the fourth quarter.
Looking Ahead: Reaccelerated Growth Expected
Salesforce anticipates organic subscription and support revenue growth will reaccelerate in the second half of fiscal 2027. The company projects fiscal 2027 revenue between $45.8 billion and $46.2 billion, representing 10% to 11% year-over-year growth.
AI Strengthening, Not Disrupting, the Salesforce Ecosystem
Salesforce’s AI initiatives appear to be enhancing its overall platform rather than replacing it. All ten of the company’s largest deals in the fourth quarter included Agentforce. Informatica, which strengthens the Data 360 platform, was part of six of those ten wins. This suggests customers are investing in the integrated Salesforce stack, not just standalone AI solutions.
Expanding the Installed Base with AI
Salesforce is focused on upgrading its existing customer base – encompassing 100 million seats – to higher-priced subscriptions that include AI capabilities. This involves increasing seat counts as return on investment grows and offering consumption-based credits for customer-facing AI applications. Sequential and year-over-year seat growth in the fourth quarter indicates AI is accelerating platform adoption.
Valuation and Investment Potential
Currently, Salesforce trades at around 13 times forward earnings, below its historical average. Considering this relatively modest valuation alongside positive AI-driven growth indicators, the stock appears to be an attractive investment opportunity.
Frequently Asked Questions (FAQ)
Q: What is Salesforce Agentforce?
A: Agentforce is a platform that allows businesses to build, manage, and deploy AI agents to automate tasks and improve efficiency.
Q: How is Salesforce integrating AI into its offerings?
A: Salesforce is integrating AI through Agentforce, Data 360, and premium AI-focused products like Agentforce One Edition.
Q: What is Salesforce’s revenue outlook for fiscal 2027?
A: Salesforce expects revenue between $45.8 billion and $46.2 billion for fiscal 2027, representing 10% to 11% year-over-year growth.
Q: Is Salesforce a good investment right now?
A: With a modest valuation and positive growth indicators, Salesforce appears to be a potentially attractive investment, but investors should conduct their own research.
Manali Pradhan, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Salesforce. The Motley Fool has a disclosure policy.
