The Salesforce Dip Is a Buying Opportunity

Fears of artificial intelligence replacing SaaS companies were the major factor that caused Salesforce (NYSE: CRM) to decline by 25% this year. However, more people are realizing that the drop was unwarranted. Shares are up by almost 20% over the past month, and real fundamental growth is driving the rally.

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Agentic AI is driving growth

One of the big shocks for SaaSpocolypse advocates is that Salesforce and other software companies are actually gaining market share thanks to AI. Salesforce CEO Marc Benioff told investors that agentic AI is "the biggest growth opportunity for our customers" while discussing fiscal 2027 first-quarter results.

Salesforce also touted itself as the No. 1 agentic CRM as it crossed $1 billion in Agentforce annual recurring revenue. Salesforce has delivered 3.8 billion Agentic Work Units to its customers, showing that demand is heating up.

Revenue for its fiscal 2027's first quarter was up by 13% year over year, thanks in part to agentic AI. Those 3.8 billion Agentic Work Units also represent a 111% sequential growth rate. Increased usage of agentic AI may force enterprises to upgrade their Salesforce plans. That's part of the reason Agentforce and Data 360 annual recurring revenue surged by more than 200% year over year.

Guidance suggests that the momentum will continue. Salesforce told investors to expect $11.31 billion in revenue at the midpoint of its fiscal 2027 second-quarter guidance. Its revenue range implies 10% to 11% year-over-year growth. Salesforce also anticipates 11% year-over-year revenue growth in full-year fiscal 2027.

A backlog of $33.6 billion in current remaining performance obligations supports those lofty goals. Its current RPOs are up 14% year over year.

The valuation is too low to ignore

Salesforce has become much cheaper due to the prolonged correction and stronger fundamentals. It only trades at a 21 P/E ratio, while it traded above a 40 P/E ratio less than one year ago.

The company's 52% year-over-year earnings per share growth in its fiscal 2027's first quarter suggests that the stock's valuation will get more attractive in the upcoming quarters. Those sales are backed by high annual recurring revenue and a vast pipeline of future sales.

It's not every day that investors interpret a tailwind as a headwind. Investors feared that Salesforce would be replaced or lose significant market share because of artificial intelligence. However, it has used that same technology to attract more businesses, retain existing customers, and get enterprises to upgrade their plans.

Agentic AI is a major part of Salesforce's long-term story, and growth continues to be parabolic. As the year-to-date dip looks harder to justify, Salesforce may find itself in a better position to reclaim its 52-week high.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Salesforce. The Motley Fool has a disclosure policy.