Salesforce's latest quarterly report has alleviated extreme market concerns that AI will disrupt the CRM platform, but Bank of America cautions that the structural erosion of the traditional per-seat licensing model by AI is ongoing, and the scale of emerging AI businesses is not yet sufficient to justify the company's lofty valuation.

Bank of America analyst Tal Liani noted in an August 27 research report that the significance of Salesforce's quarterly performance lies not in the magnitude of the beat, but in its challenge to the pessimistic narrative that AI will replace Salesforce—the market debate has shifted from whether the CRM platform will be displaced by AI to whether Salesforce can effectively monetize AI.

However, Bank of America simultaneously emphasized that AI's substantive contribution to revenue is still in its early stages. The core per-seat licensing business model continues to face structural erosion from agentic AI, and with the company's current valuation sitting at the high end of its peer group, the risk-reward profile is asymmetric.

According to the latest financial data, Salesforce's second-quarter total revenue grew 10.8% year-over-year to $11.345 billion, slightly exceeding market expectations. Organic revenue growth was 6.4%, with management guiding third-quarter organic growth of approximately 7.4%. The full-year revenue guidance was raised by $300 million, but only $100 million of that came from organic improvement. Bank of America noted that Agentforce annual recurring revenue (ARR) grew more than 240% year-over-year, yet its absolute scale of just $1.5 billion remains minuscule relative to the $46 billion revenue base.

On valuation, Bank of America maintained its underperform rating, pointing out that Salesforce's current valuation sits at the high end of its peer group, with an enterprise value to free cash flow (EV/FCF) multiple of approximately 13 times. The firm's $160 price target is based on 9 times expected EV/FCF for calendar 2027, which sits at the lower end of the 8-14 times range among software peers, primarily attributable to the company's relatively weaker growth outlook.

Quarterly performance: stable but unremarkable, with mixed details

Bank of America believes the quarter's financials slightly exceeded expectations overall, though the composition was uneven. Total revenue reached $11.345 billion, up 10.8% year-over-year, surpassing the 10.6% market expectation. Subscription and support revenue grew 11.7% year-over-year, also beating the anticipated 11.3%. Current remaining performance obligations (cRPO) grew 13.9% year-over-year, roughly in line with the 13.7% market estimate, and grew 14% on a constant currency basis, exceeding the 13% expectation.

The firm noted that the profit side was slightly less impressive. Gross margin came in at 80.0%, below the 80.6% market expectation, while operating margin of 34.1% was marginally below the anticipated 34.2%. Notably, quarterly earnings per share (EPS) of $5.90 significantly exceeded the $3.26 consensus, but this difference was primarily driven by large fluctuations in strategic investment gains—net strategic investment income reached $2.613 billion for the quarter—rather than core operational improvements, limiting its relevance for assessing underlying business fundamentals.

Total remaining performance obligations (RPO) grew 10.7% year-over-year, below the 12.6% market expectation, marking a relatively weak indicator for the quarter. Professional services revenue declined 3.8% year-over-year, continuing its soft trend.

AI monetization: right direction, but still small scale

Agentforce was the most closely watched AI narrative this quarter. Bank of America data shows Agentforce ARR grew more than 240% year-over-year, with platform usage continuing to expand. The partnership with Anthropic has also extended context capabilities across multiple application layers. Management indicated that approximately half of Agentforce bookings came from credit refills, suggesting positive customer engagement and repeat usage intent.

However, Bank of America remains cautious. Agentforce ARR currently stands at just $1.5 billion, an extremely low proportion relative to Salesforce's approximately $46 billion revenue base. The firm explicitly stated that AI's substantive impact on the revenue curve is "too nascent to impact the revenue profile," making it difficult for AI to serve as a core catalyst for valuation re-rating in the near term.

From a customer behavior perspective, signals including large transactions, premium seat upgrades, Flex Credit purchases, and seat expansion all point to stable purchasing patterns. Strong performance in mature markets such as the United States, the United Kingdom, and Japan also suggests that AI is currently enhancing rather than replacing Salesforce's core products. But Bank of America stressed that this dynamic simultaneously means the growth ceiling for the traditional seat-based model remains intact.

Structural concerns: seat-based model under pressure, moat built on barriers rather than growth

Bank of America's report explicitly identified the core structural contradiction facing Salesforce: agentic AI is fundamentally eroding the seat-count-based monetization model. AI-driven automation directly suppresses net new seat growth, renewal pricing power, and the economic logic of upsells.

The firm believes Salesforce's current competitive advantage increasingly relies on defensive barriers created by customer switching costs, rather than the growth momentum of the business itself. This characteristic aligns more closely with a valuation framework for mature enterprises than with the premium logic applied to high-growth technology companies.

Organic revenue growth of 6.4% remains modest, in the firm's view, for an industry leader trading at approximately 13 times EV/FCF in mature markets. Management expects improvement in the second half of the year. While cRPO and subscription revenue growth both exceeded expectations and full-year revenue guidance was raised, organic improvement accounted for only one-third of the total increase, with the remainder coming from the Informatica acquisition contribution.

Looking ahead, Bank of America believes Salesforce holds certain strategic positioning advantages for the next phase of AI competition through Agentforce, Slack, and its acquisition strategy spanning data, applications, agents, and interface layers. Management remains optimistic about the second half, guiding third-quarter revenue growth of 11.7% (including approximately 4 percentage points from Informatica) and cRPO growth of 14%, both slightly above market expectations.

However, Bank of America's core assessment remains unchanged: with the AI monetization path not yet clearly realized, organic growth still in the single digits, and valuations already elevated, the risk-reward profile at current share prices is unfavorable for investors. The quarterly report proves Salesforce's resilience, but it is not yet sufficient to justify a higher valuation premium.