Sustainable Growth Advisers, LP on Salesforce
Thesis
SGA maintained Salesforce despite weak investor sentiment and uneven product performance. 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 was growing rapidly. Management expects a second-half reacceleration and continues to target double-digit organic growth through 2029 with annual margin expansion. SGA believes Salesforce's deep integration into customer workflows, large installed base and broad product suite should allow it to compete effectively in the Agentic AI era and support low-teens earnings growth over the next three years.
“Despite concerns around AI-driven competition, we believe Salesforce’s integration into customer business processes, large installed base, and wide product set position it well to compete effectively in the Agentic AI era”
Key risks
- AI-driven competition
- Weakness in Marketing, Commerce and Tableau
- Execution risk around the expected second-half growth reacceleration