Sustainable Growth Advisers, LP on Salesforce, Inc.
Thesis
Salesforce detracted as growth in current remaining performance obligations merely met guidance and several product areas remained weak. SGA nevertheless believes the company's deep integration into customer business processes, large installed base and broad product suite position it to compete in the agentic AI era. Strength in Sales Cloud, Service Cloud, Slack and Data Cloud is offsetting weakness in Marketing, Commerce and Tableau, while Agentforce annualized recurring revenue reached $1.2 billion and grew 205%. Management continues to target a second-half reacceleration, long-term double-digit organic growth and steady margin expansion. SGA still expects low-teens earnings growth over the next three years, but lowered the position to a below-average target weight.
“we believe Salesforce's integration into customer business processes, large installed base, and wide product set position it well to compete effectively”
Key risks
- Persistent weakness in Marketing, Commerce and Tableau
- AI-driven competitive pressure
- Failure of the expected second-half growth reacceleration