Shares of Salesforce jumped nearly 4% on Thursday as investors responded positively to the company's strong quarterly performance and its strategic push into artificial intelligence (AI). The customer relationship management (CRM) software giant has been heavily investing in AI integration across its product suite, including its popular messaging platform Slack, to enhance functionality and attract a broader customer base.
Goldman Sachs analyst Kash Rangan noted that Salesforce is emerging as an "under-appreciated AI winner" due to its unique data assets and early success with generative AI (GenAI) agents. Despite concerns that reduced cloud spending might impact Salesforce in a challenging economy, the company exceeded expectations, reporting better-than-anticipated revenue, profit, and margins for the second quarter.
In light of these strong results, Salesforce also raised its profit forecast for the fiscal year ending January 2025, bolstered by last year’s restructuring efforts, which have contributed to expanding margins.
Valuation metrics show Salesforce trading at 24.49 times Wall Street’s profit expectations, a competitive figure compared to SaaS peers like ServiceNow, trading at 52.11 times, and cloud contact center firm Five9 at 13.30 times, according to LSEG data. If Thursday's gains hold, Salesforce could add approximately $9 billion to its market capitalization, bringing it to around $248 billion.
However, analysts like Raimo Lenschow of Barclays caution that while the quarterly results are impressive, more catalysts are needed to sustain a long-term rally. These could come from new AI solutions, which Salesforce plans to showcase at its upcoming Dreamforce event in October.
Looking forward, some analysts see significant growth potential in Salesforce's AI-powered customer support platform, Agentforce, which is not yet commercially available. If successfully launched, this platform could further solidify Salesforce's position as a leader in AI-driven innovation.
