Salesforce may finally have found its AI footing. What it means beyond the initial hype

Salesforce ‘s stalled stock needed a jump-start. At least for now, the software maker’s new AI offering has got it running again. Salesforce commenced its much-hyped annual Dreamforce conference last week with shares down 20% from their highs of the year and mounting questions about whether the company could successfully harness the artificial intelligence boom to accelerate revenue expansion — or instead whether it was at risk of declining relevancy as adoption of the nascent technology grows. It emerged from Dreamforce with a more defined path to AI success that is sweetening investor sentiment, according to Jim Cramer and Wall Street analysts alike. The difference maker is Agentforce, the company’s new suite of AI-enhanced chatbot tools, which were rolled out in earnest at last week’s gathering of customers in San Francisco. If Agentforce realizes its potential, it would represent an encouraging win for the company’s homegrown innovation efforts. In the recent past, Salesforce has relied on multibillion-dollar acquisitions of companies such as Slack, Mulesoft, and Tableau to expand its topline. Bowing to investor pressure, Salesforce has adopted a more disciplined approach to dealmaking, increasing the importance of internal product development. “Agentforce is the product announcement [Salesforce] investors have sought for years,” Needham analysts wrote in a recent note to clients. “Quite simply, our conversations within the CRM ecosystem highlighted an overabundance of Agentforce interest.” Investors appear upbeat about the AI chatbot tools, even if their financial contribution is not immediate. Shares of Salesforce are up more than 8% over the past five sessions including Wednesday, outperforming the tech-heavy Nasdaq , which has climbed about 3% in the same stretch. To be sure, Salesforce’s burst has merely put the stock a few dollars above where it traded before its late May earnings debacle , which underlined the challenges faced by enterprise software companies for the past two years as customers tightened their budgets. Salesforce stock remains down about 13% from its 2024 peak close and record high of $316.88 a share on March 1. CRM 1Y mountain Salesforce’s stock over the past 12 months. Salesforce’s aggressive cost-cutting to boost profit margins propelled its stock throughout 2023, nearly doubling over that stretch. That upswing continued into 2024 on its way to that March record. But as the pace of that margin expansion slowed and its topline growth remained under pressure, Salesforce shares were without an obvious reason to go up. Other parts of tech were more exciting to investors, particularly as Salesforce’s first product suite to ride the AI wave — branded as Einstein Copilots — seemingly failed to move the needle. Now Agentforce has emerged as Salesforce’s flagship AI offering. And, according to Barclays, it looks like the long-awaited “new catalyst” for the software stock. “True, we are still on a journey here, but it is very clear that the company’s AI platform story is coming together from a product perspective and, it seems to create healthy customer interest,” analysts at the firm said in a note last week. Agentforce is essentially a basket of tools that allows a Salesforce client to create more capable and conversational chatbots by leveraging its data stored across other Salesforce applications to improve performance on a variety of inquiries and tasks. For example, one such task could be updating a shipping address on an order after it was already placed. Salesforce announced that Saks Fifth Avenue has been testing Agentforce for that purpose and will soon deploy it. In a more general use case, a virtual sales agent could automatically follow up on a lead with a prospective customer then pass it off to a human salesperson. In hyping Agentforce, executives have touted the ability of the AI agents to take actions without needing to pull a human into it, such as issuing a partial refund to a customer who reached out about a shipping delay. That seems to be a key feature of Agentforce, which will be generally available Oct. 25 for sales and customer service uses. Salesforce is offering out-of-the-box agents, as well as what it calls “low code” options that companies can customize for their needs without too much technical hassle. “[Agentforce] is the true use case of AI because it will make your company so much better and more lucrative,” Jim wrote in his Sunday column . “I can see every retailer of any size, any company that has interaction with clients or potential clients, will be at a huge advantage.” Agentforce pricing starts at $2 per conversation, Salesforce said, though there will be volume discounts offered to heavy users. In notes to clients, Wall Street analysts sought a bit more clarity on how pricing will evolve. But they expect that charging by consumption will remain constant. That’s because one of the issues hanging over Salesforce and other enterprise software stocks this year has been their historical reliance on seat-based licenses. Investors have worried that such a business model could be threatened by growing adoption of AI down the road. The thinking is that if AI-fueled productivity gains means companies need fewer employees, they also would need fewer licenses for Salesforce applications. In the near term, Agentforce could actually drive up demand for other Salesforce applications, analysts said, most notably its Data Cloud offering. That application, which helps unify data from multiple sources into one platform, has already been a bright spot in recent quarters. Paid customers in its most-recent earnings report more than doubled year over year. “Agentforce could drive more multi cloud deals, given the benefit of standardizing solutions and data on one platform,” Bank of America told clients last week. Investors like deals involving multiple applications because it suggests companies will be stickier customers. Despite optimism on Agentforce’s potential, multiple analysts did caution that an immediate financial benefit is unlikely. Bofa said a meaningful contribution shouldn’t be expected until Salesforce’s fiscal 2026, which begins in February 2025. Analysts at Baird offered a similar timeline. Still, some on Wall Street see reasons to purchase Salesforce shares now. Piper Sandler upgraded the stock Tuesday to a buy-equivalent rating and upped its price target to $325 a share from $268. Analysts said Salesforce is cheap compared to peers on multiple valuation metrics with ample room to increase free cash flow ahead. Piper argued that Agentforce and Data Cloud could help stabilize demand and possibly drive a topline recovery beginning at the end of next calendar year. Salesforce has tested investors’ patience, but the reward for sticking around has come into view. (Jim Cramer’s Charitable Trust is long CRM. See here for a full list of the stocks.) 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