(Reuters) – Salesforce shares rose more than 5% on Thursday as investors welcomed the customer relationship management software maker’s upbeat quarterly results and its growth spurt from artificial intelligence.
The company has invested heavily in integrating its AI technologies into existing products, such as the messaging platform Slack, to expand their functionality and attract more customers.
“We continue to view Salesforce as an underrated AI winner due to its differentiated data and early success in building/deploying GenAI agents,” said Kash Rangan, analyst at Goldman Sachs.
Wall Street was concerned that muted cloud spending in a tough economy would hurt Salesforce, but the software-as-a-service (SaaS) company reported better-than-expected revenue, profit and margin results in the second quarter.
Salesforce also raised its earnings forecast for the fiscal year ending January 2025 as margins continue to rise thanks to last year’s restructuring efforts.
The stock is trading at 24.49 times Wall Street earnings expectations. By comparison, SaaS competitor ServiceNow is trading at 52.11, and cloud contact center company Five9 is trading at 13.30.
Salesforce is expected to add $14 billion to its market cap if premarket gains continue. The company’s valuation was $248 billion at the close on Wednesday.
“We think these results alone are not enough to trigger a sustainable rally from here. For that, we need more catalysts that could come with the new AI solutions,” said Barclays analyst Raimo Lenschow, which is set to be presented at the Dreamforce event and launched in October.
Some analysts believe that the customer support platform Agentforce, which is not yet commercially available, has the potential to drive sustainable growth in the coming quarters.
(Reporting by Akash Sriram in Bengaluru; Editing by Shinjini Ganguli)
