Salesforce Benefits as AI Drives Software Growth

Positive Quarterly Results Boost Investor Confidence

Investors reacted positively to Salesforce’s latest quarterly results and its push into artificial intelligence (AI). As a result, Salesforce (CRM.N) shares rose approximately 4%. The company is heavily investing in AI technologies to enhance its existing products and attract more users.

AI Integration in Salesforce Platforms

Salesforce aims to improve its platforms by integrating AI, especially in applications like its messaging app, Slack. These enhancements are designed to boost functionality and user engagement. As Goldman Sachs analyst Kash Rangan noted, Salesforce stands out as an “under-appreciated AI winner” due to its unique data and early success with generative AI agents.

Strong Performance Amid Economic Concerns

Despite worries about reduced cloud spending during a challenging economy, Salesforce reported second-quarter revenue, profit, and margins that exceeded expectations. The company also raised its profit forecast for the fiscal year ending January 2025. This improvement reflects ongoing margin expansion, supported by last year’s restructuring efforts.

Market Valuation and Comparisons

Currently, Salesforce trades at 24.49 times Wall Street’s profit expectations. This valuation compares favorably with SaaS competitor ServiceNow, which trades at 52.11, and cloud contact center firm Five9, which trades at 13.30, according to LSEG data. If current gains hold, Salesforce could add around $9 billion to its market capitalization, which stood at $248 billion as of Wednesday’s close.

Future Growth Depends on AI Catalysts

Barclays analyst Raimo Lenschow said, “These results alone are not enough to drive a sustainable rally.” He added that new AI solutions, expected to be showcased at Salesforce’s Dreamforce event and launched in October, could provide the necessary catalysts.

Some analysts also see growth potential in the customer support platform Agentforce, which has yet to be commercially released. This platform might contribute significantly to Salesforce’s future success.

Salesforce AI growth and quarterly performance