Can Agentforce Save Salesforce? Q1 Earnings Put the AI Bet to the Test
Can Agentforce Save Salesforce? Q1 Earnings Put the AI Bet to the Test
- Salesforce is scheduled to report earnings on Wednesday, May 27.
- Investors are focused on Agentforce as software companies face AI test.
- Traders expect an EPS of $3.13 on $11.05 billion in revenue.
Salesforce faces a test on artificial intelligence
Salesforce (CRM) is scheduled to report first quarter earnings on Wednesday May 27, after the market close.
The stock hasn’t had a great year, as fears over artificial intelligence displacing legacy software companies dragged down the entire software as a service (SaaS) segment.
Since the start of the year, Salesforce stock is down nearly 32% and trades near three-year lows.
In February, Claude and other AI providers released agentic models that threatened to replace workers that took up software seats.
Fewer seats means less revenue from licensing, a model that companies like Salesforce depend on.
Agentic AI breaks the equation, so software companies are now forced to adapt. Or Die. Salesforce is adapting by pushing Agentforce, its platform for deploying AI agents that automate business tasks.
Rather than charging for how many people will be using it, Salesforce is charging on the amount of work the agent does for them. The company is essentially conceding that this is the new way forward.
The market hasn’t rewarded Salesforce for this yet, as it hasn’t proven that Agentforce can considerably scale. Salesforce is in a unique position to pull it off, as the company has decades of data, deep CRM integration, and proven relationships with companies that have been using Salesforce for years.
That’s why the number one things investors will be watching for in the earnings call will be numbers related to Agentforce. It’s still small at only $800 million in annual recurring revenue (ARR), a small part of its over $40 billion a year in revenue.
What do analysts expect?
According to TradingView, analysts expect CRM to post earnings per share (EPS) of $3.13 on $11.05 billion in revenue. That would compare to EPS of $2.58 on $9.83 billion in revenue a year ago. Last quarter, CRM reported EPS of $3.81 on $11.2 billion in revenue.
Those headline numbers will likely be washed out by the finer details, especially as they relate to Agentforce. Agentforce growth needs to continue. Last quarter, Agentforce ARR was at $800 million, growing nearly 170% from a year before. Investors will want to see the number approaching $1 billion ARR.
Trading CRM earnings
Salesforce traded with an implied volatility rank (IVR) of 85.9 as of Tuesday, May 26. That means volatility is elevated compared to the past twelve months of trading.
Options on CRM show an expected move of +/- 14.08 points, or 7.9% in either direction.
Given that CRM is trading near three-year lows, the stock could be insulated from further downside, especially if the numbers are good.
Technically, the areas of potential support are at the recent low from April at 163.52, and at 159.66, the low from February 2023. Both of these are beyond the expected move to the downside. That said, traders who want to harvest some premium and expect Salesforce to remain above those potential support areas could do so by selling a put spread.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
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