Salesforce shares dropped 25% this year as investors feared AI would displace the software company, but the stock has rebounded nearly 20% in the past month as the market recognizes the opposite is happening: Salesforce is using agentic AI to drive growth and command higher prices.
The company posted 13% year-over-year revenue growth in its latest quarter, crossed $1 billion in Agentforce annual recurring revenue, and delivered 3.8 billion Agentic Work Units to customers—a 111% sequential surge.
With shares now trading at a 21 P/E ratio versus above 40 a year ago, and the company posting 52% year-over-year earnings per share growth, the market may have overshot the downside.
What happened
Salesforce shares fell 25% this year amid fears AI would replace software companies, but have since climbed almost 20% over the past month. The company reported fiscal 2027 first-quarter revenue up 13% year over year, driven by agentic AI (software that autonomously performs business tasks); it crossed $1 billion in Agentforce annual recurring revenue and delivered 3.8 billion Agentic Work Units to customers, a 111% sequential growth rate.
Why it matters
The market's original concern—that AI would harm SaaS companies—has inverted: Salesforce is using AI to gain market share, retain customers, and push enterprises to upgrade plans. CEO Marc Benioff called agentic AI "the biggest growth opportunity for our customers." Agentforce and Data 360 annual recurring revenue surged more than 200% year over year, suggesting enterprises are paying more for AI-enabled services, not abandoning the platform.
What to watch
Salesforce's valuation has compressed to a 21 P/E ratio, down from above 40 less than one year ago, while the company posts 52% year-over-year earnings per share growth and guides for 10–11% revenue growth in fiscal 2027 second quarter and 11% for the full fiscal year. A $33.6 billion backlog in current remaining performance obligations supports that outlook.
Salesforce's share price fell 25% in the year to publication, driven primarily by investor anxiety that artificial intelligence would displace or significantly erode the company's competitive position in the software market. This fear proved to be unfounded. Over the past month alone, shares have recovered nearly 20%, and the rebound is grounded in concrete operational results rather than sentiment.
The core driver is agentic AI—software that performs business tasks autonomously. In its fiscal 2027 first-quarter earnings, Salesforce announced that it has become the No. 1 agentic CRM and crossed a milestone of $1 billion in Agentforce annual recurring revenue. CEO Marc Benioff told investors that agentic AI represents "the biggest growth opportunity for our customers." The company delivered 3.8 billion Agentic Work Units to customers during the quarter, a 111% sequential growth rate that signals heavy deployment. Combined, Agentforce and Data 360 annual recurring revenue surged more than 200% year over year—far outpacing the company's overall revenue growth.
Total revenue in fiscal 2027's first quarter grew 13% year over year, and management's forward guidance projects 10–11% year-over-year revenue growth in the second quarter and 11% for the full fiscal year. These figures are underpinned by a $33.6 billion backlog of current remaining performance obligations, which itself grew 14% year over year. Rather than cannibalizing existing revenue, the shift to agentic AI appears to be pushing enterprises to upgrade their Salesforce plans, creating a situation where the technology that investors initially feared would disrupt the company is instead driving higher customer spending.
The valuation adjustment has been severe but arguably insufficient given the earnings momentum. Salesforce now trades at a 21 P/E ratio, down from above 40 less than one year ago. In the same period, the company posted 52% year-over-year earnings per share growth in its most recent quarter. By traditional valuation measures, this combination—a halving of the multiple paired with accelerating earnings—suggests the market may have overcorrected to the downside. Investors who feared AI would replace SaaS companies have instead watched Salesforce use that very technology to retain existing customers, attract new ones, and command higher prices.
Salesforce's 25% decline this year was rooted in a straightforward market fear: that artificial intelligence would render SaaS (software-as-a-service) vendors obsolete or force them to cede share to new AI-native competitors. That narrative has collapsed in light of the company's actual results. Rather than losing ground, Salesforce has weaponized agentic AI—software that independently executes business workflows—to expand its total addressable market and deepen customer lock-in. The fiscal 2027 first-quarter data tells this story concretely: 3.8 billion Agentic Work Units delivered at a 111% sequential clip suggests enterprises are not just adopting the technology but using it at scale, and the 200%-plus surge in Agentforce and Data 360 annual recurring revenue implies they are willing to pay significantly more for it.
The valuation reset is equally striking. Salesforce now trades at a 21 P/E ratio versus above 40 one year ago—a 50% compression in multiple—even as the company printed 52% year-over-year earnings per share growth in the most recent quarter. This mismatch suggests the market overshot on the downside, pricing in a disruption narrative that the company's own execution has disproven. Management guidance—10–11% revenue growth in the second quarter and 11% for full fiscal 2027, backed by a $33.6 billion backlog in current remaining performance obligations (up 14% year over year)—implies the momentum is durable, not a one-quarter bump.
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