Meet the company leading the ‘third wave’ of artificial intelligence (AI). The share price is up 39% in four months and could rise even further in 2025.
Developments in the field of artificial intelligence (AI) have accelerated in recent years.
Just a few years ago, AI typically referred to machine learning models that predicted the next best thing to do. Everything from facial recognition to what you see next in your Instagram feed is powered by machine learning algorithms.
The second wave brought advances in generative AI, with large language models that built on the predictive capabilities of the first wave to generate new content based on those predictions. OpenAI’s ChatGPT brought generative AI to the masses in 2022, and its use across industries has exploded over the past two years.
The next wave of AI will further build on the capabilities of generative AI, allowing AI to make decisions and take actions across applications without human intervention. Salesforce(NYSE: CRM) CEO Marc Benioff calls it the “digital workforce.” And his company is leading the growth in this Agentic AI with its new Agentforce product.
While there’s already some excitement among investors about Salesforce’s AI capabilities, which have sent its shares up 39% since early September (December 30, 2024), the company is just getting started. This is why Salesforce was able to post better-than-expected results in 2025, helping its stock soar even higher.
Image source: Getty Images.
Salesforce is a leader in the field of business software. The offering includes a solution for customer relationship management, marketing automation, customer service applications and data organization and analysis. As a result, many companies run much of their operations through Salesforce software, using it to store and leverage customer and company data.
That is a big advantage when it comes to AI. Artificial intelligence algorithms are only as good as the data used to train them. Salesforce has precise and specific data about each of its business customers that no one else has. While individual companies could give other companies access to that data, Salesforce’s ability to quickly and easily integrate customer data and proprietary data sets makes it a top choice for customers looking to add AI agents to their “workforce.” During the company’s third-quarter earnings call, Benioff called Salesforce’s data an “unfair advantage,” noting that it makes Agentforce agents more accurate and less hallucinogenic.
Benioff also mentioned what could be Salesforce’s biggest competitor in Agentic AI, Microsoft(NASDAQ: MSFT). While Microsoft has a lot of access to business customers thanks to its Office productivity suite and other business software solutions, it doesn’t have as much high-quality data about a business as Salesforce. As a result, Microsoft’s Copilot capabilities may not be suitable for Agentforce in many cases. Benioff points out that Microsoft doesn’t use Copilot to support its online helpdesk like Salesforce.
Agentforce can be used to deflect customer service issues or resolve issues. It can process unorganized data for review and then use it to optimize marketing campaigns it created in the first place. It can qualify sales leads brought in by marketing campaigns before handing them over to a human agent for a sales call, helping companies close more deals in less time.
The customer response was strong. Salesforce signed 200 Agentforce deals in the first week after launching in late October. On the third-quarter earnings call, Benioff said thousands more transactions are in the pipeline.
Analysts also expect an increase in spending on AI agents. Multiple forecasts call for annual average growth of more than 40% through the end of this decade or beyond. Salesforce is well positioned to capture a significant share of that market.
Salesforce stock isn’t cheap, but compared to other major AI stocks, it trades at an attractive valuation.
Investors can currently buy shares of the stock for around 30 times analysts’ estimates for the 2026 fiscal year (ending January 2026). That’s a better price than Microsoft’s expected profit of 33.
Salesforce’s current remaining performance obligations accelerated last quarter, increasing 10% year over year. That suggests Salesforce’s revenue will increase in the coming quarters. With strong early demand for Agentforce, that acceleration could continue for several more quarters.
Meanwhile, management’s focus on driving profitable growth is paying off. Salesforce’s current operating margin forecast for fiscal 2025 (ending January) is now 32.9%, up 240 basis points from 2024. Management sees further improvements ahead as it sees strong growth in its Data Cloud, driven by the adoption of Agentforce. Salesforce’s earnings should grow faster than revenue for the foreseeable future.
While analysts don’t expect Salesforce to take off in 2025 (earnings estimates call for 12% earnings growth), they seem optimistic about the stock price. The average analyst price target is $415, which implies an upside of 23% from here.
But if there’s one thing investors have learned from the past two years of AI innovation, it’s that these things often grow faster than expected. That could lead to Salesforce outperforming analyst expectations in the coming years as it leads the third wave of artificial intelligence.
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Adam Levy holds positions at Microsoft and Salesforce. The Motley Fool holds positions in and recommends Microsoft and Salesforce. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Meet the company leading the ‘third wave’ of artificial intelligence (AI). The share price is up 39% in four months, and could rise even further in 2025. was originally published by The Motley Fool
