Salesforce’s AI Opportunity Is Bigger Than the Market Thinks
Salesforce: Q2 results and updated valuation
Salesforce’s CEO, Marc Benioff, has always been a great salesman. He radiates enthusiasm, mostly about his own products, and rarely misses a chance to exaggerate. The problem is that exaggeration eventually shows up in the numbers.
At its 2022 Investor Day, Salesforce projected $50 billion in revenue for FY2026. That target is now just over $41 billion. Overpromising and underdelivering isn’t great.
And yet, Salesforce is hard to ignore. The stock has gone nowhere for five years, but margins are climbing, buybacks are increasing, and free cash flow yield is now in the mid-single digits. Investors are turning away just as the setup is improving.
More importantly, the next technological step of enterprise software—agentic AI— is here and growing rapidly. Salesforce has signed 12,500 Agentforce deals in under a year, 6,000 of them paid. With a $155 billion market by 2030 and early adoption already contributing to revenue, this is the kind of inflection point that should draw your attention.
Solid Q2 Results, But the Market Wants More
Three weeks ago, Salesforce reported Q2 earnings. Revenue grew 10% YoY to $10.24 billion, operating margin expanded from 19.1% to 22.8%, and CRPO rose 11% to $29.4 billion.
Data Cloud and AI ARR reached $1.2 billion, up 120% YoY, with 12,500 Agentforce deals made since launch less than a year ago, of which 6,000 paid. Relative to projected FY2026 revenue of just over $41 billion, $1.2 billion is still a small portion, but not negligible. And it will only keep growing from here.
Salesforce also repurchased $2.2 billion of stock (~0.9% of market cap) and boosted its buyback authorization by another $20 billion, bringing the total to $50 billion. By any reasonable standard, these are solid results.
Yet the stock has barely moved. Short-term investors are frustrated by 10% growth and what they see as slow margin expansion. Analyst Gil Luria at D.A. Davidson summed it up:
“They’re really not delivering on either. Their margins this year are going to be relatively flat, the quarter beat by a little bit, and they guided a little lower than consensus for next quarter… The growth is no longer there, they’re not expanding margins fast enough. They really are stuck and they really will need those activist investors to do what they did two years ago.”
Luria’s narrative isn’t entirely accurate. Salesforce’s operating margin is expected to reach 21.2% this year, up from 19% last year—not “relatively flat.” Growth is slower than it used to be, but at Salesforce’s scale, ~10% revenue growth with ~2% margin expansion is solid.
Activist pressure has happened before. In 2022, hedge funds forced Salesforce to cut costs, and margins jumped from 2% to 19%. Starboard Value, one of those funds, is back building a position.
Short-term pressure to increase margins will continue, but long-term investors should focus on the bigger opportunity: profitable growth powered by agentic AI.
Agentforce and The AI Opportunity
Agentic AI refers to autonomous, action-taking systems that automate complex business processes. Bank of America defines it as shifting Gen-AI from a reactive tool to a proactive, goal-driven virtual collaborator. MIT research shows individuals working with AI agents are 60% more productive.
In essence, an AI agent is a digital ‘assistant’ capable of performing tasks independently within defined parameters, ranging from simple actions to complex workflows.
Agentic AI adoption remains minimal today—Anthropic found only ~4% of occupations use AI for at least 75% of their tasks. That won’t stay low for long. The efficiency gains are too compelling, and companies that hesitate risk falling behind.
The market will be enormous. Bank of America estimates global knowledge worker wages at $18.6 trillion. If agents take over just 10% of that work, roughly $1.9 trillion of value is created. Even if software vendors capture only 8%, that implies $155 billion in annual agentic AI spending by 2030. BofA’s estimates will certainly be off, but the scale is what matters.
And that 2030 estimate is only directional. If agents automate a greater share of work down the road (which is highly likely), the value created runs into the trillions. And if software vendors are able to capture a larger slice of that value than the 8% BofA assumes, the revenue opportunity expands even further.
Salesforce is well positioned to benefit from this enormous opportunity for two reasons: distribution and data.
With more than 150,000 customers and penetration into over 90% of the Fortune 500, Salesforce can push Agentforce directly into its installed base. That distribution advantage is difficult to match and means adoption can scale faster than smaller rivals.
Data is the second advantage. Salesforce sits at the center of mission-critical workflows where companies record customer interactions, sales pipelines, service histories, and much more. And Salesforce is making sure it stays that way: Slack, which holds a goldmine of organizational knowledge, is now closed to third-party access, ensuring proprietary data stays in Salesforce’s ecosystem. Together, Slack and Salesforce apps provide depth and breadth of data no third-party vendor can easily replicate.
The strategy was further explained during the earnings call: Slack is evolving to serve as the interface for Sales Cloud, Service Cloud, IT service management, and other products, converging into one agentic workspace.
Competitors like Microsoft and ServiceNow exist, but Salesforce’s combination of distribution, proprietary data, and early adoption makes it particularly well positioned to capture agentic AI growth.
Salesforce is at an inflection point in terms of AI adoption, and yet the market is pricing it cheaply.
Should You Buy Salesforce Today?
Salesforce currently trades at a low valuation. On TTM free cash flow of $12.5 billion, the stock offers a 5.3% free cash flow yield, or 3.9% if you adjust for stock-based compensation.
A 10-year reverse DCF with a 10% discount rate and 2% terminal growth rate implies Salesforce needs to grow free cash flow by just 7.2% annually to justify today’s price. That hurdle is hardly excessive.
Monte Carlo DCF modeling is less useful here. Salesforce doesn’t reinvest heavily through its cash flow statement; capital allocation is mostly S&M and R&D, with acquisitions only occasionally. Investors should instead look at the scale of the opportunity ahead.
If Bank of America’s TAM projections are directionally correct, and Salesforce captures even 10% of the $155 billion 2030 agentic AI market, that equates to an additional $15.5 billion of high-margin revenue. Combine that with the existing cloud suite conservatively growing at roughly 8% annually, and Salesforce could reach $60-80 billion in revenue by 2030.
At a conservative 25% profit margin, this translates to $15–20 billion of net income. Apply a P/E of 25 (today’s P/E is 35!), and the market cap would fall between $375 billion and $500 billion. From today’s price, that implies a CAGR of 10–16%.
Obviously, these are napkin math estimates, but I like the direction Salesforce is going. And most importantly, Salesforce doesn’t need impossible assumptions for investors to earn attractive returns.
I believe any price below $250 makes Salesforce a strong buy.
Thanks so much for reading.
Lucas
Author & Founder, Summit Stocks
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Disclaimer: the information provided is for informational purposes only and should not be considered as financial advice. I am not a financial advisor, and nothing on this platform should be construed as personalized financial advice. All investment decisions should be made based on your own research.