Salesforce is driving the AI transformation with the Agentforce and Data Cloud, but it has an increased risk of valuation and execution pressures and threats of competition with technology rivals.

Salesforce stands at a relatively critical fork: between a highly headlong drive into AI-centric innovation and a myriad of valuation and implementation issues. At the center of its action plan is Agentforce, a low-code platform that is expected to enable the deployment of autonomous AI agents to sales, marketing, service, and data management. Real-time insights and workflow optimization are certain promises offered by these agents enabled by highly sophisticated models.

All these developments notwithstanding, the region of valuation at Salesforce is of concern. Selling at both a price/sales ratio of 7.3x and a P/E ratio of 44.7x (far above its market trends), the company enjoys a premium that is dependent on the ability to monetize AI offerings. However, the financial returns from Agentforce and Einstein 1 won't materialize until 2027.

Some of the risks that Salesforce is subjected to include high expenditure on R&D, competition by Microsoft and Oracle, and insufficient adoption by smaller businesses. Its $8 billion deal to acquire Informatica has failed to generate significant synergies, as had been seen in the failed past efforts.

However, there are some positive aspects to consider. The Data Cloud grew 120 percent YoY in ARR sales, and Agentforce enabled 4,000 paid deals in enterprise AI adoption. CFOs are finding it more comfortable allocating more budgets to the agentic AI, and the increase is a signal that there is confidence.

Salesforce is an opportunity and a risk to investors. Envisioned success with implementing its AI strategy would cement its reign over the CRM space, whereas delays would default into valuation re-pricing.