Company Overview
Salesforce Inc is a leading enterprise customer relationship management (CRM) provider, operating with a recurring subscription business model and maintaining deep customer integration. The company has been strategically expanding into AI-driven workflows through its Data Cloud and Agentforce platforms, positioning itself at the forefront of enterprise artificial intelligence adoption.
Financial Performance and Outlook
Salesforce delivered solid first-quarter FY27 results, with revenue and profit after tax and minority interests (PATMI) meeting expectations at 23% and 26% of full-year forecasts respectively. Revenue grew 13% year-on-year to US$11.1 billion, primarily driven by higher subscription sales, while PATMI surged 37% year-on-year due to improved operating leverage.
Looking ahead, Phillip Securities Research expects FY27 growth of 11% year-on-year, with Platform Cloud leading the charge at an anticipated 30% growth rate. This expansion is supported by early adoption of Agentic AI technology, where token usage is already experiencing rapid growth. The research house anticipates reacceleration in the second half of FY27, driven by larger AI-led deal wins and strong monetisation across premium stock keeping units, seat expansion, and usage-based credits.
Key Growth Drivers
The Positives
Cloud services continue to be the primary growth engine for Salesforce. Total group revenue increased 13% year-on-year to US$11.13 billion, with Subscription and Support contributing 95% of overall revenue through a 14% year-on-year increase. The standout performer was Platform Cloud, including Agentforce 360, Slack, and other products, which surged 43% year-on-year to US$2.7 billion, significantly accelerating from the previous quarter’s 16% growth.
Agentic AI momentum is building substantially across the platform. Agentforce annual recurring revenue exceeded US$1 billion, representing approximately 2.4% of FY26 total revenue and more than doubling from two quarters prior. Growth products, encompassing Agentforce, Data 360, and Informatica Cloud, reached US$3.4 billion compared to US$2.9 billion in the previous quarter. Customer adoption remains robust, with more than 50% of bookings driven by existing customers. Notably, Agentic Work Units, which track completed AI-driven tasks such as decisions or record updates, rose 111% quarter-on-quarter.
Investment Recommendation
Phillip Securities Research maintains a BUY recommendation with a raised DCF target price of US$270, increased from the previous US$253. The higher target price reflects an 11% reduction in share count due to an accelerated share repurchase programme, whilst WACC and terminal growth assumptions remain unchanged.
Frequently Asked Questions
Q: What is Phillip Securities Research's recommendation and target price for Salesforce?
A: Phillip Securities Research maintains a BUY recommendation with a DCF target price of US$270, raised from the previous US$253.
Q: How did Salesforce perform in the first quarter of FY27?
A: Revenue grew 13% year-on-year to US$11.1 billion, whilst PATMI increased 37% year-on-year. Both metrics met expectations at 23% and 26% of full-year forecasts respectively.
Q: What is driving Salesforce's revenue growth?
A: Growth is primarily driven by higher subscription sales, with Platform Cloud leading at 43% year-on-year growth to US$2.7 billion, alongside early adoption of Agentic AI technology.
Q: How significant is Agentforce to Salesforce's business?
A: Agentforce annual recurring revenue exceeded US$1 billion, representing about 2.4% of FY26 total revenue and more than doubling from two quarters ago.
Q: What are the growth expectations for FY27?
A: Phillip Securities Research expects FY27 growth of 11% year-on-year, led by Platform Cloud at 30% growth, with reacceleration expected in the second half, driven by AI-led deal wins.
Q: How much has the share count been reduced?
A: The share count has been reduced by 11% due to an accelerated share repurchase programme, which contributed to the higher target price.
Q: What percentage of Salesforce's revenue comes from subscriptions?
A: Subscription and Support revenue contributes 95% of overall revenue, growing 14% year-on-year.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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