Have you ever watched a stock you wrote off months ago suddenly roar back to life and wondered what on earth you missed?
That’s exactly what’s happening with Salesforce right now. After a painful 21% drop year-to-date while the Nasdaq flew higher, shares are up roughly 13% this week alone – on track for the strongest weekly performance since 2023. And honestly? It feels like the market just woke up.
The Quarter That Changed the Narrative
Let’s be real – the headline numbers were a mixed bag. Revenue climbed 8.6% year-over-year to $10.26 billion, but still fell a whisper short of the $10.27 billion analysts wanted. In any other environment that tiny miss would have triggered a sell-off. Instead, the street shrugged, focused on the massive earnings beat, and sent shares flying.
Adjusted earnings per share came in at $3.25 – crushing the $2.86 consensus by a mile. When companies deliver that kind of bottom-line surprise, especially in a tough macro, investors tend to forgive a few million on the top line. In my experience, that’s usually a sign confidence is returning.
Why the Sudden Love for a “Legacy” Software Giant?
For most of 2024 the narrative was brutal: generative AI was going to eat the lunch of every traditional SaaS company. Why pay Salesforce big subscription dollars when ChatGPT can apparently do everything for free?
Turns out the reality is a lot more nuanced – and potentially far more profitable for incumbents who move fast.
Salesforce didn’t just talk about AI this quarter. They shipped it, sold it, and started banking serious recurring revenue from it. The star of the show? A product suite called Agentforce.
Agentforce: From Skepticism to 330% Growth
When Agentforce launched, plenty of analysts yawned. Another me-too AI assistant in a sea of chatbots, right? Wrong.
Annual recurring revenue for Agentforce exploded 330% year-over-year to $540 million in a single quarter. That’s the kind of hockey-stick growth we used to see in the early cloud days.
“Why everyone is so excited about Agentforce is because this is what AI was meant to be. It brings together humans and data and AI and apps, and delivers an incredible experience for companies.”
Marc Benioff, Salesforce CEO
Benioff has never been shy, but this time the numbers are doing the talking for him.
Think of Agentforce less as a chatbot and more as a digital workforce. These aren’t just canned responses – we’re talking autonomous agents that can handle customer service escalations, sales qualification, or even supply-chain routing with minimal human oversight. Early adopters in customer service are apparently seeing dramatic efficiency gains.
The Acquisitions Nobody Talked About (But Should Have)
Quietly, Salesforce picked up two startups that supercharge the AI story: Regrello (supply-chain automation) and Waii (natural-language-to-code generation). These aren’t splashy moonshots – they’re pragmatic, immediately integrable tools that make Agentforce smarter out of the gate.
In a world where every tech CEO claims to be “AI-first,” execution is the only thing that matters. So far, the execution looks solid.
Wall Street Flip-Flops in Record Time
Remember when every note basically read “AI disruption risk”? Funny how a couple of good quarters can rewrite the thesis.
Mizuho analysts now say Salesforce remains “levered to digital transformation” and expect “solid growth with continued fiscal discipline.” Translation: higher margins, fatter free cash flow, happy shareholders.
Cantor Fitzgerald highlighted maturing Agentforce strategy and strong early traction in service cloud – exactly the vertical everyone worried would get eaten by free AI tools.
- Agentforce ARR: $540 million (+330% YoY)
- Remaining performance obligations: up double-digits
- Operating margin expansion continuing
- Free cash flow margin guidance raised again
Those aren’t hope-and-pray metrics. That’s a company hitting its stride.
The Bigger Picture for Cloud Software
Perhaps the most interesting aspect – and the reason I think this move has legs – is what it says about the entire enterprise software sector.
For months investors treated SaaS stocks like melting ice cubes. Budget scrutiny, lengthening sales cycles, AI substitution fears – you name it. Salesforce was the poster child for all of it.
If the 800-pound gorilla can not only survive the AI winter but actually weaponize it for faster growth and higher margins, the implications are massive for ServiceNow, Workday, Adobe, and others.
Suddenly “defensive tech” doesn’t look so defensive anymore.
Valuation: Expensive or Reasonable?
Let’s address the elephant in the room. Even after this week’s pop, Salesforce still trades below its historical average forward P/E multiple. Given the reacceleration in growth and the margin tailwind, some argue it’s actually cheap on a PEG basis.
Others will counter that 2025 estimates still need to move higher before the valuation feels truly compelling. Fair point. But momentum is a powerful thing, and right now the momentum crowd is firmly in control.
What I’m Watching Next
Dreamforce is usually where Salesforce drops its biggest bombs. If early Agentforce traction turns into a flood of enterprise deals, we could be looking at a genuine re-rating.
- How fast can they scale Agentforce seats?
- Will gross margins keep climbing as high-value AI workloads mix in?
- Any sign of sales cycle shortening again?
- Competitive response from Microsoft Copilot and others
Those will be the questions that decide whether this is a short-covering bounce or the start of a new bull leg.
One thing feels certain: the “AI is going to kill Salesforce” trade is officially dead. Whether the “AI will make Salesforce dramatically more valuable” trade is just being born – well, that’s the part I find fascinating.
Sometimes the best investments are the ones everyone gave up on right before everything clicked. Maybe, just maybe, Salesforce is about to remind us of that old lesson.
