Salesforce's AI Agent Business Is Growing Over 200%, But Will It Show Up in Its Order Book?
Key Points
The company monetizes agents through premium seat upgrades, new seat sales, and prepaid consumption credits.
Management promised faster growth nearly a year ago, but signed customer contracts haven't taken off yet.
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Salesforce (NYSE: CRM) reports second-quarter results on Wednesday after the close. The report lands as investors continue to debate the future of enterprise software. Salesforce sells most of its subscriptions on a per-user basis, but AI agent adoption is expected to disrupt this model.
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Agentforce, the company's suite of AI agents that complete work like resolving support cases and qualifying sales leads, reached $1.2 billion in annual recurring revenue last quarter, up 205% year over year. Agents have been given 3.8 billion tasks to date.
Management has spent the past year predicting that overall growth would accelerate as a result, but the value of signed customer contracts hasn't sped up yet. It's grown at a steady pace over the past two quarters.
Image source: The Motley Fool.
How Agentforce turns adoption into revenue
Salesforce gets paid for agents through three primary paths. The first is by upgrading existing users to premium editions that include unlimited agent use. Bookings for these higher-tier seats grew nearly 60% year over year in the first quarter.
The company also sells new seats for its core Sales and Service Clouds, and management noted that seven of the top 10 deals added seats last quarter.
The third path is through Flex Credits, a prepaid balance that customers draw down to fund automated work. Much of that usage gets bundled inside traditional flat-fee contracts, which can hide how much agents are actually being used.
The difference between usage and contract value
The order book shows whether all that agent activity is turning into actual revenue. Usage figures are helpful in gauging adoption, but the current remaining performance obligation, or cRPO, measures the actual dollar value of contracts due within 12 months. Investors want to track organic cRPO, which excludes the effect of recent acquisitions.
Shares have rebounded roughly 40% from the June low and now trade at 15 times forward earnings estimates heading into this week's report. The debate surrounding the future of SaaS won't be settled overnight. The software renewal windows over the next year or two will decide whether enterprises lean on agents to cut seats or keep expanding their spending.
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Bryan White 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.
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