Salesforce's AI Agentforce Poised to Drive Growth and Stock Rally

AI Agentforce to help fuel a rally in Salesforce stock: analyst By Investing.com

Investing.com -- Bank of America (NYSE:BAC) analysts believe Salesforce (NYSE:CRM) stock has more upside potential this year, citing an optimistic growth outlook driven by the company's new AI offering, Agentforce, and a more favorable spending environment. Despite the stock's impressive performance in 2023 and 2024, with gains of 98.5% and 27.1% respectively, Salesforce shares still trade at a discount compared to its peers. According to BofA, the company's stock is valued at 19 times the calendar year 2026 (CY26) estimated free cash flow (FCF), compared to 27 times for the Growth at a Reasonable Price (GARP) group. Slowing revenue growth has been a concern for investors, with an 8% increase in the third quarter of fiscal year 2025 (FY25), down from 18% in FY23. However, BofA forecasts a revenue growth acceleration to 12-13% year-over-year by the second half of FY26, driven by "1) a better spending environment and 2) Agentforce," analysts Brad Sills and Carly Liu said. The analysts note that the software spending cycle, which began to slow in the second quarter of CY22, is showing signs of relief. This easing of pressure is evidenced by a more positive tone from the System Integrator (SI) channel and software companies surpassing top-line outlooks. Drawing parallels with the post-great recession period, analysts expect a 1 percentage point boost to the company's base case committed remaining performance obligations (cRPO) growth estimate of 10% in the first half of the year. In terms of Agentforce's potential contribution, BofA estimates that the new service could add 2 percentage points to year-over-year subscription revenue growth by the second half of FY26 in an optimistic scenario. This estimate is based on incremental subscription revenue of $675 million for FY26 and $1.6 billion for FY27. Although it is still early in the Agentforce cycle, the groundwork for deployment has been set with Data Cloud, and channel feedback indicates an increase in Data Cloud deals attached to renewals for use with Agentforce. "With Agentforce launching in October 2024 and 9 to 12 month sales cycles for the average Salesforce deal, we estimate 1% to 2% points incremental NRR and revenue growth from Agentforce occurring as early as Q3FY26, bringing the growth rate to 12% to 13%," analysts concluded.

Salesforce's AI Agents Pivot Is Already Showing Results - Salesforce (NYSE:CRM)

For the quarter ended on October 31st, Salesforce CRM reported that revenue grew 8% YoY to $9.44 billion, surpassing LSEG's consensus estimate of $9.34 billion. Net income grew 25% YoY to $1.5 billion. Adjusted earnings of $2.41 per share which came short of LSEG's estimate of $2.44. Fiscal fourth quarter guidance Salesforce guided for current quarter sales between $9.9 billion and $10.10 billion and earnings per share in the range between $2.57 and $2.62. Salesforce ended 2024 on a strong note as it continues its transformation journey. Salesforce CEO Marc Benioff summed up the report as yet another quarter of exceptional financial performance across revenue, margin, cash flow, and cRPO, with the AI system for enterprises built into the Salesforce Platform being at the heart of its groundbreaking transformation. Salesforce's Agentforce is an example of so-called AI Agent technology, with such advanced chatbots believed to represent the next step after Microosft Corporation MSFT-backed OpenAI's ChatGPT. The recently launched Agentforce' AI software platform or so-called agents stand for advanced generative AI tools that can do multistep, complex tasks on a user's behalf. Benioff described it as AI agents letting humans unite to transform all customer interactions, allowing human capital to be used where it really makes a difference, such as strategic work. Since Microsof-backed OpenAI launched ChatGPT, a wave of innovation followed. Microsoft alone has also invested billions to develop its own AI products, but there is a lot of of execution ahead, just like for Meta Platforms META and Google who also touted their efforts to make their AI assistants more productive. Moreover, Benioff even took a hit at Microsoft, saying that its Microsoft Copilot is overhyped, like all LLM-based generative AI assistants, in his effort to shift the conversation towards AI agents that are becoming increasingly important in the new era that is in the making. All in all, the better than expected revenue and strong outlook fueled hopes for Salesforces much-hyped artificial intelligence strategy coming to fruition. In addition, Seeking Alpha reported that a survey of chief information officers by KeyBanc showed that IT budgets are poised to increase 3.9% YoY in 2025, which would benefit both Salesforce and Microsoft, among other players. DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice. This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy. CRMSalesforce Inc$331.99-0.19%Overview Rating:Good62.5%Technicals Analysis1000100Financials Analysis400100WatchlistOverviewMETAMeta Platforms Inc$625.880.38%MSFTMicrosoft Corp$442.75-0.77%Market News and Data brought to you by Benzinga APIs