Salesforce, the unknown agentic AI player
Salesforce sells force, what else does it do? Why is it so interesting right now?
Welcome to the newest deep dive. I am writing about fantastic companies that are trading at a cheap/fair valuation given the quality of the underlying business. Before I look at the price, I make sure that I have a thorough understanding of the company behind the stock, and I share my research with you.
My most recent deep dives, such as Amazon (+18%), Arista Networks (+103%), and AMD (+107%), have shown a stellar performance. You will find them here
Intro
I first consciously came across Salesforce in 2017 when a Canadian colleague preached Salesforce and how fantastic it is. Salesforce has a cult like following, and this is always a good indicator to look deeper into a company. Cults tend to be irrational but full of preachers, who are perfect for free marketing.
If you work in a large(r) corporation and you have any touchpoints with the sales and marketing team, I am sure that you have heard of Salesforce. Just like SAP is dominating the ERP market, Salesforce dominates the CRM (customer relationship management) market. But there is a lot more to Salesforce than the CRM part.
If you are a regular reader of this publication, you will be familiar with Salesforce. The last time I wrote about Salesforce was in this article:
Side note: Salesforce has one of the coolest tickers out there, choosing $CRM was a true master piece.
This article has been in the making for a while, and a lot of effort went into it. If you want to say thank you and appreciate the work, please consider becoming a paid subscriber. 😊
The Company
Salesforce was founded in 1999, just before the dot-com bubble burst, by Marc Benioff, and went public in 2004 at a stock-split-adjusted price of $2.75 a share, with just 518 employees. The office gives me some early Amazon vibes.
Fast forward 21 years, and Salesforce is up roughly 100x and has more than 76,000 employees. Damn, these software companies have grown large and employ an incredible number of people. Salesforce is based in San Francisco in the Salesforce Tower, showing its might in the Bay Area. Yes, that big one in the middle of the picture.
Salesforce is a household name in the enterprise software market, and more than 90% of the Fortune 500 companies are Salesforce customers. The largest and most important customer of Salesforce is the US government, which spends north of a billion USD.
The Business
This is how Salesforce describes its CRM solution in the annual report
Our AI-powered Salesforce Platform unites our offerings — spanning sales, service, marketing, commerce, collaboration, integration, AI, analytics, automation, industries and more — by connecting customer data across systems, applications and devices to create a complete view of customers.
With Agentforce, the agentic layer of the Salesforce Platform, our customers can build and augment their teams with an always-on digital labor force, deploying autonomous AI agents across business functions that aim to increase productivity, lower costs and drive operational efficiencies.
The Salesforce platform is relatively easy to configure (if there is such a thing), and third-party vendors can offer their own solutions that are then integrated into the Salesforce platform. The number of paying subscribers per customer can be anywhere from one to hundreds of thousands.
AI AI AI. Of course, Salesforce is part of the AI wave and even wrote about it in their annual shareholder letter on page 3:
The future of AI isn’t coming, it’s here. And Salesforce is at the forefront of this revolution, thanks to agentic innovation.
Salesforce loves AI, and the term AI is mentioned 91 times in the latest annual report, and “Agentforce” is mentioned 39 times. CEO Marc Benioff is obviously super bullish on Agentforce and announced this in the latest quarterly earnings call
It’s a huge vision for the future of business and, really, it’s a huge vision for the future of Salesforce. But this isn’t just an upgrade. This isn’t simply just automating some existing business process. These agentic enterprises -- well, for Salesforce, it’s certainly true, it’s a complete transformation. And for our customers, the agentic enterprise is a complete reinvention, in many cases, of who they are and what their potential is. It’s a shift from traditional hierarchies to reshaping the entire company, from busy work to orchestrating workflows, from siloed teams to seamless collaboration, from clicking and routing to natural conversations, and hours are shrinking to seconds, employees and customers are being augmented.
Where things get interesting is the shift from helping sales reps and service personnel to do their jobs better to actually replacing a certain number of people with agentic solutions. While this is very unpleasant for the affected individual, it gives the decision makers a clear return on investment. If Salesforce can deliver on this promise, customers will be banging on their doors.
Marc Benioff touched upon this here:
we can see crystal clear that Salesforce has the opportunity to do exactly what you’re saying, which is to reduce everybody’s support cost to make everyone’s sales organization a lot more productive, to make everyone’s marketing have a much higher ROI, to make every field service technician a superman or superwoman and to make every Slack user far more empowered in their organization than ever before.
CEO Marc Benioff said the following about AI and AGI in the September earnings call, which I find quite interesting. He acknowledges the limits of large language models but claims that, coupled with (Salesforce) enterprise software, they can become something powerful.
The reality is you can see these large language models are actually hitting the upper limits of their existence. They are themselves finite data sets built on the Internet built on finite set of algorithms. And we can see what those are and what they are not. There’s no question about that, okay? But that idea that they’re valuable, yes, you can use them, coupled with enterprise software to do some incredible things.
Salesforce is platform-neutral and, unlike others, can be integrated in AWS, Azure, Google Cloud, Databricks, Snowflake, and many more.
Like most SaaS companies, Salesforce generated most of its revenue in the Americas, with Europe and Asia Pacific contributing 1/3 of total revenue. Another interesting funnel for Salesforce is the partnership with AWS Marketplace, which has so far added more than $2 billion of business.
To get an idea of how much effort Salesforce invests in its shows like Dreamforce, watch this short highlight clip from the recent Dreamforce 2025.
On the Keynote, Salesforce Management stated that they are developing from a CRM platform to a “digital labor” infrastructure provider. As part of this initiative, Salesforce is moving from a seat-based license (you pay per person using the software) to an “agentic enterprise license agreement” (ELA). That’s a fancy word for giving customers a flat-fee unlimited access to the tools for 2-3 years. This has the benefit that the CIO or CEO making the buying decision on the customer side knows how much they will spend in the upcoming years without any nasty surprises from usage-based pricing, and Salesforce can already lock in orders and upcoming revenue. Salesforce argues that customers adopting this ELA license model spend 2-4x the money than before.
Products
Salesforce clusters its offering into these categories: Sales, Service, Platform, and Others, Marketing and Commerce, Integration and Analytics, and Others. Salesforce makes 94% of its revenue from subscription and support revenues. Service has become Salesforce's largest category, and apart from Marketing and Commerce, all offerings grew double digits.
Let’s go through each of them in detail in order to give you a better understanding of what Salesforce actually sells:
Sales
To put it in plain terms: Salesforce knows everything about your customer. The entire customer journey is tracked in Salesforce in a single integrated platform. Everything from prospecting to sales engagement, analytics, performance management, and orders and revenue is included. The next big thing, Agentforce, is also included and takes over tasks from human workers.
Service
A direct competitor to ServiceNow, Salesforce Service integrates the customer service and field service into one platform. ServiceNow itself is another interesting company that is worth a look. The chart tells you that ServiceNow is onto something.
Having customer service and field service on a single platform might sound trivial, but if you worked in a larger corporation with no proper system to track and handle service cases, you would know how important it is to have a single place to store them. It is incredibly time-saving and gives your customers a faster and better process, and in turn increases your customers’ happiness.
With the help of AI, simple tasks can be automatically resolved, and as a result, your service employees can tackle the tougher cases. A lot of tasks that are known as level 1 support will be automated in the future. Saving these costs in the form of lower personnel expenses is a direct benefit of Salesforce Service. This saves a lot of time and, in the end, money.
Salesforce Service also brings field service solutions that enable companies to connect mobile workers, field service agents, and dispatchers. Via this tool, the open tasks and jobs can be tracked and managed, and teams can better plan their schedules.
Platform and Other
The Salesforce platform enables teams of all sizes to build business workflows, applications, and AI agents on a single platform. This is done via no-code and low-code tools. No-code and low-code enable people like you and me to build tools without having to learn how to write code for many years. This, of course, broadens the potential user base significantly. The Salesforce platform is built on Hyperforce (yes, Salesforce is quite creative with names), which in turn enables builders to manage data governance and compliance as they require.
Slack
Apart from all these tools, Salesforce also offers a communication tool named Slack. Salesforce bought Slack in July 2021 for a whopping $27.7 billion. The price seemed high back then (an insane 24x Revenue multiple), and looking back is probably still too high.
Slack has a longer history than Teams, but distribution is sometimes all that matters. Since Teams was originally offered free of charge if you already had a Microsoft Office subscription, the daily active users went ballistic when COVID hit.
Since 2022, the growth in Teams users has flattened, but it is still 6x more than Slack’s daily active users.
Slack is the popular alternative to Microsoft Teams and is much beloved by developers. One former OpenAI developer shared that OpenAI (the company behind ChatGPT) doesn’t use email and runs completely on Slack. I believe that there is still a valid place for Slack in the realm of office communication tools, but Teams is so deeply entrenched that it will be hard to ever catch up to the big competitor.
Marketing and Commerce
The Salesforce Marketing platform shares data with the Sales platform and allows marketers to speed up marketing campaigns. Agentforce allows users to generate briefs, content, and journeys with prompts (this is similar to ChatGPT).
Salesforce Commerce helps to create product descriptions and web pages, and is (of course) also integrated with the other platforms.
Integration and Analytics.
This segment is powered by two of the largest acquisitions of Salesforce:
Integration is done by MuleSoft. MuleSoft was acquired in 2018 for $6.5 billion. MuleSoft offers integration, automation, and API management and is used by customers ot connect data across different systems, automate tasks across systems, and scale API governance.
The Analytics segment is Tableau, another acquisition of Salesforce. Tableau was bought in 2018 for $15.7 billion and was, a couple of years ago, the leading visualization platform. Since then, Microsoft’s Power BI has taken the lead because of its tight integration with Excel, Teams, and the rest of the MS Office gang. As you can see, Salesforce is in constant competition with Microsoft
Other Salesforce Offerings
Salesforce groups in this category are all those tools that support customers in their usage of the aforementioned Salesforce products.
Agentforce is the agentic layer for deploying autonomous AI agents across the Salesforce world. It is used to build a digital labor force that takes over tasks from humans and has access to all the data in the Salesforce platform.
Data Cloud / Data 360 brings a company’s data into the Salesforce platform and connects all the data from different sources into a single model. This transforms unstructured data into structured data that can be used to generate searchable insights. With the help of Salesforce metadata, automation, analytics, and AI agents are made possible.
Industries brings out-of-the-box industry-specific AI-powered capabilities that address industry-specific demands in the Salesforce Platform.
Salesforce Starter was created for small and medium-sized companies that don’t need the full-featured (and expensive) version of Salesforce. This small version combines sales, service, marketing, and commerce in one solution.
The Technology
Salesforce runs its software in the cloud. To be more precise, Salesforce offers Infrastructure as a Service. You might claim that this doesn’t say too much, so let me elaborate: Salesforce provides the servers, storage for data, databases, and networking to its customers. These servers are operated by Salesforce but are secured within third-party data center facilities. Salesforce named AWS (Amazon Web Services) as its provider of choice, but also offers customers the choice of data residency. Therefore, Salesforce can also run on Azure (Microsoft) or Google Cloud, and many others.
Taling about Amazon and AWS: If you haven’t read my recent article on Amazon and why I am buying shares, here is your chance:
Over the many years of development and with the large takeovers such as Slack and Tableau, the Salesforce system became fragmented. To harmonize the systems, Salesforce embarked on a re-architecture to unify all those applications on a single platform. This foundational layer is called Data 360 and harmonizes data across the Salesforce applications and external sources such as Snowflake.
On top of this is the Agentforce, Salesforce’s AI platform, which enables customers to deploy (semi-)automatic agents across the whole ecosystem. Salesforce states that the “Agentic Enterprise” is the next big thing, and we will enter the next golden decade.
All of these tools are intended to reinforce customers’ stickiness and to drive more revenue as a result of seat-based upgrades and consumption-based pricing.
Competitors
Salesforce has a lot of competitors, all coming from different angles. There is the German SAP, which dominates the ERP market and also offers a CRM module. Microsoft offers its Dynamics CRM as another competitor. In the realm of Service, there is obviously ServiceNow. All in all, there are many players out there in adjacent fields, but none have the name and brand as Salesforce does in terms of pure play CRM and Service.
I don’t believe in the argument that new AI solutions will render Salesforce obsolete, since the data stored in Salesforce is too private, and Salesforce has proven to be a great vendor. On top of that, you have a strong lock-in effect. Why would a large company switch to a newborn AI solution when they don’t know if this new solution will be replaced anytime soon by the next solution? We humans are creatures of habit, and leaving software that you are well accustomed to is a pain in the butt.
The Management
Salesforce was founded in 1999 by former Oracle executive Marc Benioff, Parker Harris, Dave Moellenhoff, and Frank Dominguez. While the other three are not as prominent as Marc Benioff, two are still part of the company. Parker Harris serves as CTO, Dave Moellenhoff is, according to his LinkedIn profile, a “Founding Architect”, and Frank Dominguez left the company in 2009.
Salesforce is Marc Benioff. Marc Benioff has served as CEO since 2001. He is a salesman through and through. He does have a slight evil look, though.
He holds roughly 12 million shares of Salesforce (slightly more than me), and he sells the shares that he gets awarded through option exercises every other day. This is not a red flag per se, but it would be nice if he would keep more money invested in Salesforce. The man has an expensive lifestyle with a private Gulfstream G650 jet and a fantastic villa in Hawaii, where he also keeps buying land in Hawaii.
This is what Marc has to say about the current developments:
I’ve led Salesforce through the cloud, mobile, and AIrevolutions, but this is the most profound shift I’ve ever seen. And I’m dedicating this next chapter of my life to ensuring Salesforce leads it — with humanity, with trust, and with unmatched innovation.
Risks
There was a cute risk mentioned in the annual report. Always keep in mind that volatility is our friend and we can use it to buy great companies at good-to-reasonable prices.
Coming to more serious risks: Cyberattacks will be a major story going forward, and Salesforce addressed it as follows:
In the normal course of business, we are and have been the target of malicious cyberattacks and have experienced other security incidents. Although, to date, such identified security events have not had a material financial impact, there can be no assurance that future cyberattacks will not be material or significant.
In my opinion, it is not a matter of if, but when there will be a major data leak of customer information. These hacks can be facilitated by either directly targeting the Salesforce database or through social engineering. In this case, employees of a company are being tricked into giving access to the program or divulging confidential information. The following is a list from the website SalesforceBen of the most recent hacks.
The third risk is: Takeovers! Salesforce has been on a spending spree. Slack for $27.7 billion, Tableau for $15.7 billion, and MuleSoft for $6.5 billion have been very expensive acquisitions. Management has promised to be more conservative and talks at length about the M&A procedure, but if CEO Marc Benioff sets his eyes on a company, he will buy it. More often than not, large acquisitions tend to be a value destroyer and not a value driver.
The Fundamentals
Salesforce is being run on a subscription model, ensuring stable revenues
Income Statement
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