Salesforce has a lot of potential upside.
While the companies building out data center infrastructure have greatly benefited from the artificial intelligence (AI) boom, one question on investors’ minds is: When will this translate to growth for software companies?
Salesforce (CRM -1.60%) is one such company grappling with this issue as it looks for AI to help reinvigorate growth.
With the customer-relationship management (CRM) software company recently reporting its Q2 results, let’s take a closer at how it is progressing on this front.
Guidance maintained, and AI opportunities
Salesforce saw its second-quarter revenue rise 8% year over year to $9.33 billion, which was above its prior guidance for revenue of between $9.2 billion and $9.25 billion. Subscription and support revenue increased 9% to $8.76 billion.
Slack was strong, with revenue climbing 17%. Mulesoft grew revenue by 13%, while Tableau’s revenue rose by 11%. However, this was a big deceleration from the 27% and 21% growth these businesses saw in Q1, respectively.
Current remaining-performance obligations (cRPOs) rose 10% year over year to $26.5 billion. This metric is commonly used by software-as-a-service (SaaS) companies to show how much revenue they expect to recognize over the coming year from existing contracts. The growth rate was the same as Q1 and a deceleration from last year.
Looking ahead, Salesforce forecast Q2 revenue to be between $9.31 billion to $9.36 billion, representing growth of about 7%. It projected adjusted earnings per share (EPS) of between $2.42 to $2.44. This compared to the analyst consensus of $9.41 billion in revenue and $2.43 in EPS.
Salesforce maintained its full-year revenue forecast, with revenue expected to be between $37.7 billion and $38 billion, representing 8% to 9% growth. It continues to project that subscription and support revenue will rise around 10% year over year in constant currencies.
However, the company did increase its adjusted EPS guidance from a range of $9.86 to $9.94 to a new forecast of $10.03 to $10.11.
Salesforce was very bullish about its new Agentforce platform, which will become generally available in October. It said the feedback from pilot customers has been “overwhelmingly positive” and that this new platform will take it from AI hype to AI reality.
New bookings for AI products more than doubled in the quarter, and it signed over 1,500 AI deals in Q2. CEO Marc Benioff said his goal is for the company to have 1 billion AI agents deployed by the end of fiscal 2026, and for consumption products, that is about $2 per conversation.
Image source: Getty Images.
Time to buy the stock?
Salesforce has matured into a company with more moderate revenue growth but one where profitability is becoming more of a focus. On that front, it trades at one of the lower valuations among SaaS stocks that fall into this category, with a forward price-to-earnings (P/E) ratio of about 23.5 based on next year’s analyst estimates.
CRM PE Ratio (Forward 1y) data by YCharts
Just based on that and its solid growth as the leading CRM platform company, the stock looks attractive. However, what can really get the stock going is if Salesforce can capitalize on its AI opportunities. Software companies, in general, have lagged semiconductor and other data center infrastructure companies in terms of benefiting from AI, but ultimately, that can’t continue. Software companies and others will need to see returns on their AI investments, or the AI buildout will cease.
Salesforce laid out what looks like a huge opportunity for the company with its AI agents over the next few years. These agents are meant to help automate tasks and enhance productivity, which is something most organizations are looking for to help lower costs. This potential driver, however, is clearly not priced into the stock at the moment.
Considering that I think the stock is attractively valued even before this AI opportunity, the stock looks like a buy at these levels.
Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe, Microsoft, Salesforce, and Workday. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
