Salesforce Poised for Growth in AI-Driven Market

Artificial intelligence (AI) has advanced significantly in recent years.

Not long ago, AI primarily referred to machine learning models that made predictions about the next best actions, impacting everything from facial recognition to your Instagram feed through complex algorithms.

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The next phase began with breakthroughs in generative AI, which utilizes large language models to create new content based on insights from previous data. OpenAI’s ChatGPT, launched in 2022, has rapidly popularized generative AI across various sectors in just two years.

The upcoming era of AI aims to further enhance generative models, allowing AI to autonomously make decisions and take actions without human input. Salesforce (NYSE: CRM) CEO Marc Benioff refers to this as the “digital workforce,” placing his company at the forefront of this Agentic AI movement, exemplified by its new Agentforce product.

Investor enthusiasm for Salesforce’s AI capabilities has already resulted in a 39% increase in its stock price since early September, as observed on December 30, 2024. However, the company is still in the early stages of its potential growth. Here’s why Salesforce is likely to exceed expectations in 2025, possibly driving its stock even higher.

Image source: Getty Images.

Salesforce’s “Unfair Advantage” in AI

As a leader in enterprise software, Salesforce provides a comprehensive suite of tools, including customer relationship management, marketing automation, customer service applications, and data analytics. Many companies rely on Salesforce, running significant portions of their operations through its platform, which stores and manages vital customer data.

This access translates into a significant edge in the AI field. The effectiveness of AI algorithms depends greatly on the quality of the training data. Salesforce possesses unique and high-quality data about its enterprise clients, making it a preferred choice for businesses looking to integrate AI agents into their operations. During a recent earnings call, Benioff described Salesforce’s access to data as an “unfair advantage,” emphasizing that Agentforce’s AI agents are better at generating accurate responses.

Benioff highlighted Microsoft (NASDAQ: MSFT) as a major competitor in Agentic AI. Although Microsoft has a large user base through its Office suite and enterprise solutions, it lacks the quality and depth of data that Salesforce possesses. Consequently, its Copilot features may not be as effective as Agentforce in certain scenarios, especially since Microsoft does not utilize Copilot for its online help desk like Salesforce does.

Agentforce is designed to enhance customer service, manage unstructured data, and refine marketing strategies based on previous campaigns. It can also qualify sales leads before transferring them to human agents, ultimately improving sales efficiency.

The initial response from customers has been overwhelmingly positive. Salesforce closed 200 Agentforce contracts within its first week of launch in late October. On the recent earnings call, Benioff revealed that there are already thousands more deals in progress.

Industry analysts anticipate a surge in AI agent spending, projecting over 40% annual growth rates through the end of the decade. Salesforce is in an excellent position to capture a sizable share of this expanding market.

Salesforce Stock: A Premium Worth Considering

While Salesforce stock may not be the cheapest, its valuation remains attractive compared to other major AI players.

Currently, shares trade at about 30 times analysts’ estimates for fiscal 2026, which is more favorable than Microsoft’s estimate of 33 times.

Salesforce’s remaining performance obligations saw a 10% year-over-year growth in the last quarter, indicating stronger revenue growth ahead. The robust demand for Agentforce might lead to sustained acceleration in the coming quarters.

Additionally, the company is focusing on maintaining profitable growth. They forecast a fiscal 2025 operating margin of 32.9%, a rise of 240 basis points from the previous year, with further improvements expected. Anticipated strong adoption of Agentforce could contribute to faster profit growth than revenue for the foreseeable future.

Though analysts project that Salesforce may not see dramatic growth in 2025, with earnings estimates revealing a 12% growth, they remain optimistic about its stock price. The median analyst price target stands at $415, suggesting a potential 23% increase from its current level.

Investors are increasingly aware that AI innovations often outpace expectations. This factor could allow Salesforce to exceed analyst projections in the coming years as it leads the third wave of AI development.

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Adam Levy has positions in Microsoft and Salesforce. The Motley Fool has positions in and recommends Microsoft and Salesforce. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.