Salesforce, Inc. leads the CRM software market and delivers steady, recurring profits through its multi?product subscription model. Over the past year, I've watched the company grow revenue while also boosting margins across the board. Now, with AI driving a new wave of enterprise automation, Salesforce looks set for another growth phase. Yet recent tariff fears wiped out the post?October 2024 rallyits stock tumbled nearly 20% from about $360alongside many SaaS peers.
Salesforce's AI-Driven Comeback: A Buying Opportunity After the Tariff-Induced Sell?Off
With tariffs heating up, recession worries mounting, and macro uncertainty threatening enterprise budgets and stretching SaaS sales cycles, this pullback feels overdone. I believe it's a strong buying opportunity, supported by my valuation work. Recent winsgrowing AI adoption in its CRM platform, margin stability, and strategic partnerships with Fortune 500 firmsunderscore Salesforce's long?term potential. In my view, the market is undervaluing its profit upside right now, and a compelling growth story is unfolding.
Agentforce Is Driving a New Phase of Growth
One of the biggest reasons I'm bullish on Salesforce is because they're basically the top dog when it comes to CRM. I think that's a huge advantage now that AI is becoming a bigger deal in business software. Since Salesforce is already everywhere in the corporate world, I feel like they're in a great spot to roll out all these new AI tools without needing to fight for attention. One product that really caught my eye is their new Agentforce platform. From what I'm seeing, Agentforce seems to be off to a really good start. In FY25, Salesforce closed about 5,000 transactions for Agentforce, and 3,000 of those were actually paid deals. Now, when you think about the fact that they've got more than 150,000 customers globally, it's clear there's still a ton of room to grow. What also gives me a lot of confidence is that Salesforce isn't just selling Agentforce to othersthey're using it themselves. They've already handled over 380,000 support requests with their own AI agents, and they're getting an 84% success rate where the AI solves the issue without needing a human. That's pretty impressive if you ask me.
They've already seen some real efficiency gainsengineering productivity is reportedly up 30%, and they've even paused hiring more engineers because of it. In my view, that's going to support higher margins over the long run. They also said sales productivity jumped by 7% thanks to these tools, and AI agents are now generating over 50 personalized outbound leads daily. That's a pretty solid ROI story, which should help push broader adoption as other companies look to cut costs and boost efficiency. The monetization side is also shaping up well. Salesforce's move toward consumption-based pricing means as more big clients increase their usage of Agentforce, it could turn into a big new revenue stream. I see this being key to sustaining their top-line growth going forward. What really caught my attention was Agentforce's expanding partner ecosystem. Thanks to cloud partnerships with AWS and Google, customers can now launch pre-built AI agents without much hasslewhich I think will make adoption even easier for a lot of enterprises. They also recently introduced AgentExchange, a marketplace for pre-trained industry-specific AI apps. I see this as a smart move since it helps build out Salesforce's AI ecosystem, which should open the door to more cross-sells and up-sells. With the agentic AI market expected to grow from $5.4B in 2024 to over $52B by 2030, Salesforce looks well-positioned to ride that wave.
Margin Expansion Is a Big Part of the Bull Case
On the financial front, Salesforce reported FY25 revenue of $37.9 billion, which is a 9% YoY increase, and they posted a 33% non-GAAP operating marginup 250bps YoY. I think this shows just how much operating leverage they've built into the business. Operating expenses only rose by 3.5% YoY, which is pretty modest considering the size of the company. Since their cost base isn't growing as fast as revenues, I see that translating into healthy profit growth going forward. One thing I always look at with EPS growth is whether it's just buybacks inflating the numbers. In this case, that's not what's happening. Adjusted EPS rose from $2.29 to $2.78 YoY, and the share count hasn't changed muchso I see this as true, high-quality EPS expansion, driven by better operating performance.
Salesforce's AI-Driven Comeback: A Buying Opportunity After the Tariff-Induced Sell?Off
Guidance Looks Solid, and the Business Is Scaling Well
Looking ahead, Salesforce ended the year with nearly $60 billion in remaining performance obligations. They're guiding FY26 revenue in the $40.5$40.9 billion range (about 78% YoY growth), along with another 100bps bump in operating margins. Personally, I think they're being conservative here. I expect ongoing adoption of consumption-based pricing and internal digital labor tools to support solid operating scale, while customer demand for Salesforce's core offerings stays durable. With that kind of pricing power, I believe the company should be able to keep growing revenues at a high single-digit to low double-digit clip, while still expanding margins over time.
A Rock-Solid Balance Sheet Supports Long-Term Growth
One thing that makes me even more confident in Salesforce is how strong their financial position is right now. They've got around $14 billion in cash sitting on the balance sheet, compared to about $12.07 billion in total debt. So when you do the math, that's roughly $2 billion of net casheven after all the deals and acquisitions they've done over the past few years. From what I understand, a lot of that setup probably comes from having overseas cash while also holding U.S. debt. Management has already said they plan to use that mix to keep doing bolt-on acquisitions and also to manage bringing some of that cash back. I've always seen Salesforce as super aggressive when it comes to pushing innovation and making smart deals, and with this kind of financial firepower, I think they're in a really good spot to keep that strategy rolling. Whether it's pouring money into AI, adding new tools to the platform, or snapping up good companies, I believe they have all the resources they need to keep growing from here.
Valuation Looks Attractive After the Pullback
To me, the recent dip in Salesforce's stock is actually a great buying opportunity. Right now, Salesforce trades at just 16.7x on a 3-year FWD P/E non-GAAP basis, which is way cheaper compared to its recent peak of 25x. I think the market's reaction has been a bit overdone, especially considering the solid fundamentals and the early traction from the Agentforce platform, which I believe is going to be a big growth driver throughout 2025. Salesforce is still growing well, its margins are strong and getting better, and in my view, the stock is a bargain here.
Salesforce's AI-Driven Comeback: A Buying Opportunity After the Tariff-Induced Sell?Off
[Author's calculations]
Even though there's a lot of competition in the enterprise CRM spacewith big names like Microsoft, Oracle, and SAPI really think Salesforce deserves a premium. Right now, Microsoft is trading at about 20.6x forward earnings, SAP's up at 25.1x, and Oracle is a bit cheaper at 15.5x. Salesforce actually sits a little below the peer group when you look at profit growth estimates (12.5% vs 14.4%), but honestly, I think their huge scale and leadership in CRM make up for it. In my view, slapping a 20x forward earnings multiple on Salesforce feels totally fairmaybe even a little on the conservative sideespecially since the peer group is already trading around that level anyway. If you run the numbers, that points to about 20% upside from where the stock is today. When I look at Salesforce's dominant spot in the market, their double-digit profit growth, and how they're building real momentum in AI, I'm very comfortable with that valuation. Plus, the fact that management repurchased $7.8 billion worth of shares in FY25and still has another $10.6 billion left under their buyback plantells me they clearly believe the stock is still undervalued too. I definitely take that as a good sign.
My DCF Model Shows There's Still Upside
To cross-check the valuation, I built out a DCF model using what I think are pretty conservative assumptions. I used a 2.5% perpetual growth rate, which is quite modest for a company like Salesforce, and kept my projections in line with consensus expectations. On margins, I went with a gradual 50bps expansion per yearreasonable, given the solid operating leverage we've seen lately. Using those inputs, I arrived at an equity value of about $251 billion, which works out to around $292 per share. That still gives us about 10% upsideeven on what I would call cautious numbers. My view is that Salesforce has more room to expand margins, especially as digital labor continues to replace more internal headcount, which should help keep costs down. Even with a very conservative take on revenue growth and profitability over the next five years, there's still a pretty clear gap between the stock's fair value and where it's trading now. From what I see, the market is basically pricing in just 4% revenue CAGR, which looks extremely harsh compared to the 25% CAGR Salesforce has delivered over the last ten years. That's why I still think there's more room for the stock to run.
Big Investors Are Piling In
Another big reason why I feel good about staying bullish on Salesforce is the huge amount of institutional buying we have seen lately. In Q4 2024, Bridgewater boosted its stake by 85.8%, Soros Fund Management raised their position by 90.2%, and even Cathie Wood jumped back in after completely selling out in 2022. Her ARKW ETF bought over 67,000 shares across a couple of trades in early 2025. Ken Fisher (Trades, Portfolio)'s firm, which now holds over $4.1 billion worth of Salesforce, has also been pretty vocal about how Agentforce could turn into a major long-term growth driver. I also noticed that about four big-name investors now have more than 2% of their portfolios in Salesforce, which to me says they like it more than just your average S&P500 stock. Hedge fund interest also shot up in a big way116 funds held Salesforce in Q3, but that jumped to 162 funds by Q4. And of course, the giants like Vanguard and BlackRock are still massive holders, sitting on 83.6 million and 72.9 million shares each. When I see that kind of strong backing from major players, it definitely boosts my confidence that I am on the right side of this trade.
All of this shows me that the so-called smart money is getting behind Salesforce in a meaningful way. With strong AI tailwinds, improving margins, and increasing support from institutions and activists, I'm rating Salesforce a Buy and would recommend scooping up shares, especially if we get another pullback toward the low-$200s.
Final Thoughts
All things considered, I see Salesforce as a strong long-term growth story that's being overlooked right now. The company's innovation track record, early success with Agentforce, and smart partnerships with cloud giants like Google and AWS give me confidence that the fundamentals will only keep improving from here. Yes, the move to consumption-based pricing adds some short-term uncertainty, but in my view, it makes the business model even more scalable and aligned with future enterprise needs. With the stock trading at what I believe is an unjustifiably low multiple, I see the current dip as a great entry pointand I'm happy to stay bullish.
