Salesforce Stock Jumps 23% on Strong Q2 Results—Here’s Why the Market Still Looks Undervalued

Salesforce Stock Jumps 23% on Strong Q2 Results—Here’s Why the Market Still Looks Undervalued

Salesforce (NYSE: CRM) shares surged 22.6% on Aug. 27 after the company reported solid fiscal Q2 results and raised its full-year guidance, fueled by robust momentum across its agentic AI platform Agentforce, Data 360, and Slack.

Despite this rally, the software-as-a-service (SaaS) stock remains down year to date and could have significant upside potential as it challenges the narrative that AI will circumvent the software layer, while trading at a compelling valuation.

Let’s examine Salesforce’s latest results and growth prospects to understand why the stock may still be worth buying.

Agentic AI momentum accelerates

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 assets, with Slackbot emerging as its fastest-adopted AI product, posting 150% sequential growth to 1 million active users after launching just five months ago.

To demonstrate that AI is not replacing the software layer, Salesforce highlighted that nine of the 10 largest AI companies are using Salesforce and Slack, with their spending increasing by 435% year over year. The company also introduced Claudeforce, a plug-in featuring 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 experienced strong growth, with ARR tripling to $2.4 billion. Informatica added $1.1 billion in ARR, suggesting organic growth exceeded 60%. Combined Agentforce and Data 360 ARR climbed 210% year over year to $3.9 billion.

Overall, Salesforce’s revenue jumped 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 this growth came from its Agentforce 360 and Slack platform, which saw revenue surge 43%.

Adjusted earnings per share (EPS) skyrocketed 103% to $5.90. However, this figure 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 raised its full-year guidance.

For fiscal Q3, Salesforce has forecast revenue to increase 11% to 12% to between $11.42 billion and $11.5 billion. The company 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.

The stock still appears attractively valued

The growth Salesforce is seeing from top AI companies, combined with the introduction of Claudeforce, should help ease concerns about AI bypassing the software layer. This 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 now starting to reflect this positioning.

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 solid GARP (growth at a reasonable price) opportunity.

Is Salesforce stock a buy right now?

Salesforce’s strong Q2 results, accelerating AI momentum, and reasonable valuation suggest the stock could continue delivering value for long-term investors. The company’s ability to attract leading AI companies as customers and its expanding suite of AI-powered products position it well for sustained growth.

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.

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