Shares of Salesforce (CRM.N) climbed approximately 4% on Thursday as investors responded positively to the customer relationship management software maker’s strong quarterly performance and its strategic focus on artificial intelligence to fuel growth.
Salesforce has been making significant investments to integrate AI technologies into its existing products, including its messaging platform Slack, to enhance functionality and attract more customers. “We continue to see Salesforce as an underappreciated AI winner due to its unique data and early success in developing and deploying GenAI agents,” noted Goldman Sachs analyst Kash Rangan.
Despite concerns from Wall Street that reduced cloud spending might impact Salesforce in a challenging economy, the software-as-a-service (SaaS) company exceeded expectations with better-than-anticipated revenue, profit, and margins in the second quarter.
Additionally, Salesforce raised its profit forecast for the fiscal year ending January 2025, as margins continue to improve, largely due to restructuring efforts undertaken last year.
The stock is currently trading at 24.49 times Wall Street’s profit expectations, compared to 52.11 for SaaS peer ServiceNow and 13.30 for cloud contact center firm Five9 (FIVN.O), according to LSEG data. If the gains hold, Salesforce could add about billion to its market capitalization, bringing its valuation to 8 billion as of Wednesday’s close.
However, Barclays analyst Raimo Lenschow cautioned, “We think these results alone are not sufficient to drive a sustainable rally from here. For that, we need additional catalysts, which could come with the new AI solutions,” set to be unveiled at Dreamforce and launched in October.
Some analysts suggest that ongoing growth in the coming quarters may be driven by Salesforce’s customer support platform, Agentforce, which has yet to be commercially released.
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