Digital Transformation And AI Trends Will Drive Cloud Demand

Key Takeaways

• AI-driven platform expansion and agentic workflows are creating stronger customer lock-in, potentially accelerating growth and boosting long-term revenue stability.
  
• Margin improvements from internal efficiency gains and new market penetration may drive sustained earnings outperformance and diversified revenue streams.
  
• Intensifying regulatory scrutiny, global expansion risks, disruptive AI automation, reliance on acquisitions, and rising competition threaten Salesforce's growth prospects and profit margins.

Catalysts

Provides customer relationship management (CRM) technology that connects companies and customers together worldwide.

• Analyst consensus broadly anticipates Data Cloud and Agentforce will become multibillion-dollar product lines, yet current customer momentum-such as multiple enterprise customers refilling usage "tanks" within months and a 60% quarter-over-quarter jump from pilot to production-suggests these offerings could scale to tens of billions in annualized run rate revenue and drive accelerated top-line growth significantly above Street expectations over the next several years.
  
• While analysts expect margin improvement from unified platform strategy and cloud cost efficiency, this could understate the transformative impact of Salesforce's internal deployment-support headcount has already reduced by 40% and agent-augmented operations may enable best-in-class margin expansion, structural opex leverage, and potentially unlock sustained earnings upside far in excess of consensus.
  
• Salesforce's aggressive push into the mid-market and SMB segments, supported by AI-driven productivity for smaller companies, positions it for outsize share gains among millions of cloud-first businesses, setting up a durable, diversified revenue base and a long-term boost to average contract value and recurring revenues.
  
• The emergence of agentic enterprise workflows-where entire customer organizations are restructuring around Salesforce's AI agents-creates a powerful lock-in effect, strengthening platform stickiness and reducing churn, which is likely to materially enhance customer lifetime value and multi-year revenue visibility.
  
• As cloud adoption and remote/hybrid work environments proliferate globally-including accelerated SaaS penetration in emerging markets-Salesforce's unified, AI-driven platform is uniquely positioned to capture this rising demand, driving sustained double-digit revenue growth and global operating leverage for years to come.

Salesforce Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Salesforce compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Salesforce's revenue will grow by 12.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 16.9% today to 20.1% in 3 years time.
• The bullish analysts expect earnings to reach $11.2 billion (and earnings per share of $12.34) by about September 2028, up from $6.7 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 46.8x on those 2028 earnings, up from 35.0x today. This future PE is greater than the current PE for the US Software industry at 36.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.53%, as per the Simply Wall St company report.

Salesforce Future Earnings Per Share Growth

Risks

• Intensifying global regulatory scrutiny, including evolving data privacy regulations and compliance requirements in different geographies such as the United States, EMEA, and Japan, can raise operational costs and complexity, which would increase pressure on net margins for Salesforce over the long term.
  
• Salesforce's heavy emphasis on international and public sector expansion may be constrained by rising economic protectionism, data localization rules, and ongoing geopolitical tensions, potentially limiting international revenue growth and impacting the company's ability to meet future top-line targets.
  
• The rapid pace of AI automation and the emergence of next-generation, integrated platforms could erode the relevance of Salesforce's core CRM offerings, as enterprises may shift spending to more fully automated or hyperscaler-provided solutions, thereby threatening both recurring revenue and long-term growth.
  
• Continued reliance on large-scale acquisitions (including pending deals like Informatica) to drive innovation and portfolio expansion carries ongoing risks of integration challenges, balance sheet strain, and increased operating expenses, which could reduce earnings predictability and compress margins over time.
  
• Growing competition from low-cost, open-source, and hyperscaler "all-in-one" platforms such as Microsoft, Google, and AWS presents increasing pricing pressure and the risk of commoditization for core Salesforce products, which could erode market share and limit the company's ability to sustain revenue growth and maintain high operating margins.

Valuation

• The assumed bullish price target for Salesforce is $430.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Salesforce's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $430.0, and the most bearish reporting a price target of just $221.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $56.0 billion, earnings will come to $11.2 billion, and it would be trading on a PE ratio of 46.8x, assuming you use a discount rate of 8.5%.
  
• Given the current share price of $244.01, the bullish analyst price target of $430.0 is 43.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.