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A strong Q3 may have it headed in the right direction.
It has been a challenging year for Salesforce, the leading provider of customer relationship management software.
Salesforce stock is down about 28% year-to-date and roughly 35% over the past 12 months. Initially, part of the concern was its valuation, but it has since come down as the stock price has plummeted.
One of the main concerns about Salesforce has been it decelerating revenue which is tracking to be in the high-single digits in terms of percentage gain. In previous years, the company had double digit revenue growth. Earnings growth has been strong, but that is largely due to efficiency improvements.
The decelerating revenue could in part be due to macro challenges that its customers are facing, leading to lower enterprise spending. But also, there is some question as to whether Salesforce’s massive spending on its agentic AI through investments and acquisition is paying off – or paying off fast enough. Agentforce, the agentic AI initiative is basically autonomous chatbot agents helping out customers.
Adoption has been viewed by many investors and analysts as slower than expected since it rolled last year. But is that starting to change?
Earnings Beat and Guidance Raise
Salesforce released its earnings Wednesday after the market closed and showed some signs that it may be turning the corner.
Revenue rose about 9% year-over-year to $10.3 billion, which was in line with analysts’ expectations.
Net income jumped 40% to $2.1 billion, or $2.19 per share. Adjusted net income was $3.1 billion, or $3.25 per share, which easily beat estimates of $2.86 per share.
While these results were strong, investors were more impressed with its pipeline and outlook.
It has a remaining performance obligation of $59.5 billion, which is contracts signed but not yet fulfilled. That’s up 12% year-over-year. The current RPO, which will be fulfilled within 12 months, is up 11% to $29.4 billion.
Also, the firm also raised its guidance for the fourth quarter and full fiscal year.
We are raising fiscal year 2026 revenue guidance to $41.45 billion to $41.55 billion, and Q3 cRPO was exceptional, up 11% year-over-year at $29.4 billion, signaling a powerful pipeline of future revenue,” Marc Benioff, chair and CEO of Salesforce, said. “Our Agentforce and Data 360 products are the momentum drivers, hitting nearly $1.4 billion in ARR—an explosive 114% year-over-year gain.”
Benioff said the company has more than 9,500 paid Agentforce deals and processed some 3.2 trillion tokens, which basically refers to information processed.
Analysts Are Bullish
The firm is targeting $60 billion in revenue by 2030, driven by continued Agentforce adoption. As of the end of the last fiscal year it had about $38 billion in revenue.
Salesforce stock was up about 2% in early trading on Thursday and it got a few modest price target upgrades from analysts. The most bullish is Deutsche Bank, which raised its target to $360 per share on the agentic AI momentum. Also, Northland raised its target, but it is much lower at $267 per share.
Overall, Wall Street is generally bullish, with a median price target of $330 per share, which suggests 36% upside. The stock’s valuation has come way down with a P/E of 31 and a forward P/E of 18.
Has Salesforce turned the corner on a difficult 2025? It’s hard to say with certainty, but the Q3 earnings report indicates that it is headed in the right direction. And rates moving lower could help to facilitate more enterprise spending and investment.