Salesforce Shares Surge 23%. This Is Why the Stock Looks Like It Has a Lot More Upside Ahead.

Salesforce (NYSE: CRM) shares surged 22.6% on Aug. 27 after the company reported solid fiscal Q2 results and issued upbeat guidance, driven by strong momentum from its agentic AI platform Agentforce, Data 360, and Slack.

However, the software-as-a-service (SaaS) stock is still down year to date and could have plenty of potential upside ahead, as it starts to dispel the narrative that AI will displace the software layer, and the stock remains cheap.

Let's take a closer look at its results and prospects and why the stock still looks like a buy.

Agentic AI continues to pick up steam

Agentforce continues to drive Salesforce's growth, with the AI agent platform's annual recurring revenue (ARR) surging more than 240% to $1.5 billion. The company's Slack platform has become one of its most important, with Slackbot its fastest-adopted AI product, seeing 150% sequential growth to 1 million active users after launching just five months ago.

To show that AI is not replacing the software layer, Salesforce said that nine of the 10 largest AI companies are using Salesforce and Slack, and their spending has increased by 435% year over year. It also introduced a new product called Claudeforce, a plug-in with pre-built sales skills built on Anthropic's Claude's reasoning and agentic tool use.

Data 360 (formerly Data Cloud), which helps customers unify their data into a single source, has also seen strong growth, as ARR tripled to $2.4 billion. Informatica added $1.1 billion in ARR, suggesting organic growth was over 60%. Combined Agentforce and Data 360 ARR climbed 210% year over year to $3.9 billion.

Overall, Salesforce's revenue jumped by 11% year over year to $11.35 billion, at the high end of its guidance range of $11.27 billion to $11.35 billion and above the $11.32 billion consensus compiled by LSEG. Subscription and support revenue increased by 12% to $10.82 billion. Much of the growth came from its Agentforce 360 and Slack platform, which saw revenue surge 43%.

Adjusted earnings per share (EPS) skyrocketed from 103% to $5.90. However, that included a $2.6 billion gain on strategic investments, largely from its investment in Anthropic. Excluding that gain, adjusted EPS would have been around $3.43, applying the company's tax rate to the gain, still well above the $3.27 consensus.

Looking ahead, the company once again increased its full-year guidance, as shown below:

Data source: Salesforce. Table by author.

For fiscal Q3, the company has forecast revenue to increase by 11% to 12% to between $11.42 billion and $11.5 billion. It is projecting adjusted EPS in a range of $3.42 to $3.44. Analysts were looking for adjusted EPS of $3.38 on revenue of $11.41 billion.

Image source: The Motley Fool.

The stock still looks like a buy

The growth that Salesforce is seeing comes from top AI companies, combined with the introduction of Claudeforce, which should help ease some of the fears about AI bypassing the software layer. The narrative never made much sense, and the sector's stocks have suffered greatly as a result, including Salesforce. However, the company has positioned itself very well for agentic AI, and growth is starting to show.

At the same time, the stock still looks attractively valued even after its big rebound. Based on next year's fiscal 2027 analyst estimates, it now trades at a forward price-to-sales multiple of 4 and a forward price-to-earnings (P/E) ratio of 16. For a stock with low-double-digit revenue growth and building momentum with Agentforce, it looks like a great GARP (growth at a reasonable price) stock to own.

Geoffrey Seiler has positions in Salesforce. The Motley Fool has positions in and recommends Salesforce. The Motley Fool recommends London Stock Exchange Group Plc. The Motley Fool has a disclosure policy.