Salesforce Valuation Plummets as AI Drives Growth

Salesforce shares have taken a hit this year due to fears that artificial intelligence would replace or significantly reduce its market share. However, recent developments suggest that AI is actually driving growth for the company.

The catalyst for Salesforce's growth is agentic AI, which CEO Marc Benioff has called 'the biggest growth opportunity for our customers'. This technology is not only attracting new businesses but also retaining existing customers and encouraging enterprises to upgrade their plans. In fact, Salesforce has delivered 3.8 billion Agentic Work Units to its customers, representing a 111% sequential growth rate.

The company's fiscal 2027 first-quarter results show that revenue was up by 13% year-over-year, thanks in part to agentic AI. Agentforce and Data 360 annual recurring revenue surged by more than 200% year-over-year, likely due to increased usage of this technology forcing enterprises to upgrade their Salesforce plans.

Salesforce's valuation has become much cheaper due to the prolonged correction and stronger fundamentals. The company now trades at a 21 P/E ratio, significantly lower than its previous trading price above 40. With a backlog of $33.6 billion in current remaining performance obligations and expected revenue growth of 10% to 11%, Salesforce's valuation is too low to ignore.