Salesforce Earnings Could Spur the Stock's Best Day in Years. Is AI Hype Justified?

Salesforce Inc.’s stock rallied during its earnings call on Tuesday as the company highlighted the promising potential of its Agentforce artificial intelligence (AI) platform. By Wednesday morning, Salesforce shares were up 8.9%, contributing to a broader lift in the software sector. The iShares Expanded Tech-Software Sector ETF, which tracks software companies, also rose nearly 3%.

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Evercore ISI analyst Kirk Materne noted Salesforce’s strong enthusiasm for its Data Cloud and Agentforce initiatives. He remarked that much of the earnings call focused on Agentforce’s early successes and growing traction.

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CEO Marc Benioff emphasized the company’s commitment to expanding its sales capacity by hiring between 1,000 and 2,000 additional salespeople. According to Materne, Salesforce sees the potential for Agentforce as vast, with improved sales productivity justifying investments in expanding its distribution capabilities.

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Despite his optimism, Materne maintained a balanced perspective. He acknowledged that Agentforce is still in its infancy and isn’t significantly contributing to Salesforce’s financial guidance at this stage. Materne holds an "outperform" rating on Salesforce stock and raised his price target from $400 to $420 following the earnings report.

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William Blair analyst Arjun Bhatia echoed similar sentiments, describing customer interest in Agentforce as high. He noted that discussions with clients about adopting Agentforce have been more productive compared to earlier AI efforts, such as the Copilot initiative.

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While Bhatia acknowledged that Agentforce has yet to generate meaningful revenue or boost Salesforce’s current remaining performance obligations, he remains optimistic about its long-term potential. He believes that as adoption grows over the coming years, Agentforce could become a significant tailwind for the company’s growth, and he reiterated his "outperform" rating.

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On the other hand, some analysts maintained a more cautious stance. Guggenheim’s John DiFucci held his neutral rating on Salesforce, expressing skepticism about AI’s ability to drive sustainable revenue growth for the company.

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While he acknowledged Salesforce’s efforts to make AI accessible to enterprises and partners, DiFucci questioned whether this strategy could translate into material financial results. He argued that AI might become a standard feature for companies, making it difficult for Salesforce to command higher prices for its offerings. DiFucci also suggested that companies heavily promoting AI, like Salesforce, might have the most to lose if the technology doesn’t deliver significant returns.

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Bernstein analyst Mark Moerdler was similarly reserved, particularly given Salesforce’s strong stock performance in recent months. The company’s shares have risen 35% over the past three months, buoyed in part by the broader market’s rotation into the software sector.

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However, Moerdler cautioned that investors might be overestimating Salesforce’s ability to accelerate growth in the near term, despite management’s optimism about new growth drivers like Data Cloud and Agentforce. He pointed out that these initiatives remain in their early stages, with many uncertainties surrounding customer adoption and monetization.

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Moerdler warned that the current enthusiasm for Salesforce’s growth rebound could be premature, especially considering the stock’s elevated valuation. He maintains an "underperform" rating on the stock and set a price target of $286.

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The mixed reactions from analysts reflect a broader debate about Salesforce’s ability to capitalize on AI-driven growth. While proponents highlight the early successes of Agentforce and its potential to drive significant revenue in the future, skeptics remain cautious, citing challenges in adoption and the risk of overvaluation. As Salesforce continues to invest in expanding its sales capacity and AI capabilities, the company’s long-term success will depend on how effectively it can translate these initiatives into sustained growth and profitability.

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