Salesforce Inc. (NYSE:CRM)’s shares surged by a whopping 21% on August 27th, the day after the firm reported its second quarter earnings. The results saw the firm post $11.35 billion in revenue and $5.90 in adjusted earnings per share. Both the figures beat analyst estimates and the firm’s free cash flow marked an 81% annual growth to $1.1 billion. Perhaps most importantly, Salesforce Inc. (NYSE:CRM)’s management also outlined that the annual recurring revenue of its Agentforce platform sat at $1.5 billion. The firm also raised its full year guidance on the back of contributions from acquisitIons and its products. Ahead of the earnings, on the 24th, Cramer discussed sentiment about Salesforce Inc. (NYSE:CRM)’s earnings, which was proven incorrect:
“We see Salesforce, reports on Wednesday. And Salesforce stock, many people feeel Salesforce is going to have a bad quarter, suddenly, Salesforce stock takes up, and it’s now up, say, 50 points.
“Now I’m going to hit up the obvious. . .ServiceNow. Okay, ServiceNow is a company that is not up today, or at least this morning. But it’s up a quick 27 from where it was when it reported. Salesforce which was up gigantically last week, up a little week. I think this this is the battleground. These are the battle ground. Because, people just say you know what, I don’t anything to do with Governor Abbott, Governor Shapiro, the angry people towards the data center. But I do want tech. I do want tech. I’ll take medtech. And I’ll take non-semi tech. And that’s where we’re going. Now the problem David, is non-semi tech, other than MongoDB, doesn’t have tremendous staying power.”
For his part, in his previous comments, the CNBC TV host has often stressed on the need to pay heed to Salesforce Inc. (NYSE:CRM) Marc Benioff over reports of difficulties in AI-related revenue. On the 24th, he commented on the share price performance in the context of investors’ preference for stocks that did not have data center exposure.
The strong earnings report appeared to benefit the bullish case for Salesforce Inc. (NYSE:CRM) which expects further tailwinds for the AI-based Agentforce platform. Yet, as part of the Q2 release, management outlined that three points out of the 11 point full year guided revenue growth came from the non-AI Informatica platform. Additionally, Salesforce Inc. (NYSE:CRM)’s remaining performance obligations grew by a modest 10%, to hint at an overall slowdown.
As for ServiceNow, Inc. (NYSE:NOW), the debate is similar. In the second quarter, the firm’s AI contract value crossed $1 billion to indicate a growth in agentic AI deployments. To further bolster the bullish narrative of AI-generated growth, ServiceNow, Inc. (NYSE:NOW) also guided towards a 20% backlog growth for the third quarter. Yet, on the flip side, management also guided a 22.5% subscription growth in FY26, which hinted towards a slowdown over Q2’s 24.5%. Additionally, ServiceNow, Inc. (NYSE:NOW)’s subscription gross margin was 81%, which remained flat annually to indicate that the heavy investments in AI were not translating into bottom line growth.
Shifting towards valuation, ServiceNow, Inc. (NYSE:NOW)’s forward P/E multiple of 30.67 is twice that of CRM’s 15. However, CRM’s short interest as a percentage of float 2.83% is lower than ServiceNow, Inc. (NYSE:NOW)’s 3.24%. On the hedge fund side, 99 funds had held a stake in CRM in Q2, while the figure was 115 for ServiceNow, Inc. (NYSE:NOW). The funds, it appears, prefer to pay a premium for a stock with a higher P/E.
READ NEXT: Jim Cramer Draws the Line on NVIDIA in China: Why National Security Comes First and Jim Cramer Defends His Dell Stance as Investors Complain About Missing Out.
Disclosure: None.
