Salesforce (CRM) Was Meant to Be an AI Casualty. The Results Say Otherwise

Salesforce, Inc. (CRM) was widely expected to be among the main victims of the disruption caused by artificial intelligence (AI) in enterprise software. The concern is understandable. The rapid emergence of AI-native alternatives could reduce switching costs and weaken the traditional recurring revenue model used by software-as-a-service (SaaS) companies. However, when I look at Salesforce’s most recent results and forward guidance, I do not see a company in structural decline.

On the contrary, the customer-relationship-management giant continues to grow, and its AI products are gaining traction quickly. At the same time, the current valuation already appears to reflect a very high degree of skepticism, especially given the potential for earnings growth to reaccelerate over the next several fiscal years.

That is why I continue to view the bullish thesis on Salesforce as valid today. If fears surrounding AI prove to be overblown, I believe the stock is meaningfully undervalued. In this article, I present the main arguments supporting that view.

Punished More by AI Fears than by Business Fundamentals

It seems quite clear to me that the market has placed Salesforce in the same “basket” as enterprise SaaS companies perceived to be at immediate risk of disruption from AI. The bearish thesis that has pressured Salesforce shares is that AI coding, agentic AI, and more AI-native tools could reduce switching costs, which have long been one of the company’s biggest competitive advantages. Over time, that could lead to lower seat counts and put pressure on Salesforce’s highly predictable subscription revenue model.

The point is that Salesforce’s recent results show absolutely no sign that the business is breaking down. In Q4, Salesforce continued to grow revenue at a low double-digit rate, while non-GAAP earnings per share (EPS) jumped 37% year-over-year. That hardly looks like a business being destroyed by the AI revolution. Further evidence that growth is still being driven by the core business is that subscription and support revenue, which still accounts for roughly 95% of total revenue, increased 13% year-over-year.

Perhaps the main reason for skepticism in the quarter was the Current Remaining Performance Obligation (CRPO). This metric grew 16% year-over-year on a reported basis, but only 9% in organic constant-currency terms after adjusting for foreign exchange and the contribution from the Informatica acquisition. In other words, the business is clearly still expanding, but the underlying growth rate is somewhat less impressive than the headline figures initially suggest.

Agentforce Shows Salesforce Is Adapting to the AI Era

It is important to clarify that Salesforce is not simply sitting still and selling “traditional CRM” software. The company has been actively working to transform its installed base into an AI-driven enterprise platform through Agentforce.

In practice, Agentforce allows customers to create and deploy AI agents for tasks such as customer service, internal support, IT services, field service, and even billing resolution. A key part of this expansion has been the acquisition of Informatica, which helps organize and clean enterprise data so it can be connected reliably and used by AI agents with greater accuracy.

The data suggests that Salesforce’s AI products are gaining traction quickly. Agentforce and Data 360 already generate $2.9 billion in annual recurring revenue (ARR), with growth exceeding 200% compared to the prior year. Agentforce alone reached $800 million in ARR, up 169% year-over-year. More importantly, over 60% of new bookings have come from existing customers. To me, this strongly suggests that AI adoption is happening primarily through expansion within Salesforce’s installed base, rather than relying solely on winning new customers.

Valuation Already Reflects a Very Bearish Scenario

For the next fiscal year, FY27, Salesforce has guided revenue to reach $46 billion at the midpoint, representing 11% growth. In terms of profitability, non-GAAP EPS of about $13.15 implies approximately 5% growth. The guidance includes roughly 3 percentage points of Informatica’s contribution, making the underlying organic growth somewhat less impressive. Even so, this is nowhere near what one would expect from a company supposedly headed for structural decline.

As outlined in the consensus above, Salesforce is currently trading at a forward P/E of roughly 12.7x. To me, that valuation reflects a very high degree of skepticism around the company’s long-term growth thesis. This multiple is about 40% below the software industry average of near 25x, and more than 60% below Salesforce’s own historical average of about 45x over the past five years.

If non‑GAAP EPS growth re‑accelerates to about 13% in FY28 and roughly 19% in FY29, Salesforce’s earnings power in FY29 would imply a single‑digit multiple on that future‑year EPS, even if the stock re-rates only modestly. In isolation, that seems like a very low multiple for a company still expected to grow long-term earnings at a double-digit rate.

In other words, it seems to me that a substantial amount of pessimism is already embedded in the current share price. If Salesforce simply continues to demonstrate that AI is not structurally impairing its core business, or if sentiment toward software becomes even modestly more constructive, the re-rating potential could be quite meaningful.

Is CRM a Buy, According to Wall Street Analysts?

The consensus among Wall Street analysts on Salesforce stock is currently a Moderate Buy. Of the 37 ratings issued over the past three months, 27 are Buy, eight are Hold, and only two are Sell. Although several analysts have trimmed their price targets in recent months, the average target price still stands at $260.48, implying upside potential of roughly 45% from the current share price.

Why CRM Looks Undervalued

I view Salesforce as a Buy, as the stock appears to be trading in deep-value territory. It is undeniable that sentiment remains bearish, particularly toward SaaS companies as a whole. However, I do not see a deterioration in the underlying fundamentals that is proportional to either the scale of the fears or the magnitude of the discount the market is currently applying to the thesis.

There may still be room for prolonged skepticism in the software space in the short to medium term. Even so, when I look at the company’s long-term earnings potential and the possibility of the stock trading at a single-digit earnings multiple, I believe the risk-reward profile remains asymmetrically skewed to the upside.