By shifting to on-cloud software from complicated on-premise installations, Salesforce (NYSE:CRM) became the primary choice for customer relationship management (CRM). Companies’ sales departments embraced the simplicity of the Salesforce software-as-a-service (SaaS) model, as it scaled with their needs across organizational instances.
As a result, since the end of 2019, Salesforce market cap increased by 83% to $264.37 billion. At its all-time peak, CRM stock soared to $369 per share in early December 2024. Year-to-date, however, CRM shares dropped by nearly 17%, currently priced at $273.13 per share.
On Thursday, May 28th, the company is scheduled to report its Q1 earnings for fiscal 2026, ending April 2025. Salesforce has to beat consensus earnings per share (EPS) of $1.87, which is close to the $1.9 EPS reported in the year-ago quarter.
And just as Salesforce successfully leveraged its SaaS business model, expectations have shifted to the company’s AI-powered tools. With an already heavy market cap weight, will AI be sufficient for CRM to return to its ATH or even exceed it?
Salesforce: The Palantir of Commerce?
Way before the AI hype as we know it, Salesforce launched its Einstein AI platform in September 2016. Similar to Palantir’s Gotham, Einstein breaks down data flows into actionable objects and workflows. This includes natural language processing, predictive analytics, automation of repetitive tasks, and prioritization of customer inputs.
Sales teams then have access to a wider picture of patterns, trends and correlations in both real-time and historical data. Combined with content generation for chatbots and personalized emails, it is easy to see how Salesforce could automate away the need for large sales teams even in fairly large companies.
Although Palantir (NASDAQ:PLTR) aims to do the same for both governments and corporations, Salesforce has a head start and specializes in CRM. In FY25, the company reported $900 million revenue in Data Cloud & AI, a yearly growth of 120%. In April, Salesforce stock even earned a downgrade for its AI focus.
Having improved its AI agents (Agentforce), Salesforce also reported 84% resolution rate from chatbots across 380,000 conversations. Of those, only 2% required additional human assistance. To improve the company’s capabilities in the ongoing AI race, Salesforce signed a definitive agreement to acquire Informatica this Tuesday worth $8 billion.
Absorbing Informatica: Full Commitment to AI Agents
Informatica (NYSE:INFA) is a precursor for large AI systems. Specifically, the company is in the business of extracting, transforming, and loading (ETL) data. In contrast to a company like Datadog (NASDAQ:DDOG) which handles monitoring and analytics, Informatica is all about data integration and secure governance of that data.
This acquisition firmly sets the company on an automation course in a more robust way. Specifically, the T in Informatica’s ETL is all about making data standardized and trusted. And if the data is trusted it is more actionable for AI agents.
“Truly autonomous, trustworthy AI agents need the most comprehensive understanding of their data. The combination of Informatica’s advanced catalog and metadata capabilities with our Agentforce platform delivers exactly this.”
Steve Fisher, Salesforce CTO
Having all the data pieces for the AI puzzle under one roof, Salesforce is likely to increase its CRM market share. The company still ranks number one at estimated 24% market share, per 6sense data, with competitors like HubSpot (NYSE:HUBS) (5.8%) and Microsoft (NASDAQ:MSFT) Dynamics (4.6%) far behind.
Likewise, just as Tesla (NASDAQ:TSLA) has advantage in making full self-driving (FSD) more robust by accessing the data from millions of sold cars, Salesforce gains that network effect for its AI agents. This type of advantage is exceedingly difficult for competitors to overcome.
CRM Price Targets Ahead of Q1 Earnings
Against the average price-to-earnings (P/E) ratio in the SaaS sector of 29.4, Salesforce has a P/E of 43. With the acquisition of Informatica, this is likely justified. For the fiscal year ending January, the company delivered $6.2 billion net income, 50% more than the year prior.
Although Salesforce began firing over 1,000 employees in February, the commitment to AI is clear as the company opened up positions for 2,000 people for AI-related sales.
For FY26 guidance, Salesforces expects $40.5 – $40.9 billion revenue, which is a yearly growth of 7% – 8%. Ahead of tomorrow’s earnings report, WSJ’s forecasting data points to the average CRM price target of $364.47 per share.
The bottom outlook is $200 while the ceiling for CRM stock is $440 per share. The overwhelming majority of analysts, 40, recommend buying, while only one views the current CRM price as good enough to sell.
***
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
This article was originally published on The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.