An agent business with a dollar figure

Salesforce, which sells the cloud software companies use to run sales, service and marketing organizations, reports fiscal second-quarter results on Wednesday 26 August. At its last print it did something it had spent a year avoiding: it attached a dollar figure to its AI agent product. Agentforce annual recurring revenue was $1.2bn, up 205% year over year, inside roughly $3.4bn once the Data 360 data platform and Informatica Cloud are included. The long-standing complaint — that Salesforce could report agent deals closed but not agent revenue earned — is out of date.

That matters because the entire question hanging over this corner of software is arithmetic. If an agent does the work of a licensed user, the licensed user goes away, and the vendor needs consumption-priced agent revenue to arrive faster than seat revenue leaves.

The numbers behind the accelerating line

Salesforce's growth has gone the right way for three consecutive quarters: 8.6% year over year, then 12.1%, then 13.3% to $11.13bn. Subscription and support revenue rose 14%, with the Data 360 and platform line up 25% to $3.68bn. Current remaining performance obligation — contracted revenue due within a year, the closest thing to a forward order book — reached $33.6bn, up 14%, with total obligations of $67.9bn.

The cleanest tell is gross margin. Inference costs land in cost of revenue, so a vendor selling AI badly bleeds there. Salesforce's held at 76.92% against 76.96% a year earlier. Operating margin widened to 21.8% from 19.8%, and operating income grew 25% on 13% revenue growth. Beneath that, $27.1bn of buybacks including a $25bn accelerated repurchase cut diluted shares 9.5%, to 871m.

So the share price rose 23% over the past month and the stock got cheaper against what it earns. At 5.48x trailing gross profit per diluted share it sits below February's 5.68x, because gross profit per share grew 17% over those six months. Forward earnings are 14.8x against 24.1x trailing, on consensus of $46.11bn of revenue and $14.16 of earnings per share for the January-2027 year.

What could still be true for the bears

Salesforce is a system of engagement, not infrastructure, and rivals are learning to read its data without paying it. Atlassian's latest shareholder letter lists Salesforce records and Slack conversations as context ingested into its own graph — Salesforce as a data source rather than a customer. Zeta Global, which sells a marketing cloud that scores consumer intent from opted-in data, told investors on 4 August that Gap had made Zeta its system of record, replacing Salesforce and three other vendors. Klarna's public departure last year was the second such exit after Workday. If the coordination layer consolidates above individual applications, the per-seat base erodes regardless of how fast Agentforce compounds.

The seat-priced control group

HubSpot, which sells an integrated marketing and sales suite to mid-market businesses, is where the thesis shows damage: revenue grew 19.8%, but net customer additions came in at 7,000 against 9,000–10,000 expected, second-half guidance was cut to 5,000–6,000 a quarter, and gross margin fell 159 basis points. The shares dropped 18% in a session on 6 August and have not recovered a bullish trend since.

The others diverge from that. Braze, which orchestrates cross-channel messaging for consumer brands, grew 30.2% — the fastest in the group — while giving up 290 basis points of gross margin and running a −13% operating margin. Freshworks, selling service software to companies under 20,000 employees, grew 16% with margin flat at 84.8% and cut diluted shares 7% this year. Zeta grew 43.5% but surrendered 295 basis points of margin on channel mix, and trades at 7.33x gross profit against Salesforce's 5.15x. Pegasystems is the deteriorating case: contract-value growth halved to 7% and management blamed AI-driven deal delays.

Twilio, whose application programming interfaces embed messaging and voice in other companies' software, is the consumption-priced counter-case and the most stretched. Revenue accelerated to 22%, net expansion is 116% — about five points of that is new US carrier pass-through fees — yet its price per dollar of gross profit per share went from 6.95x in February to 13.30x now, against 4.1% growth in that gross profit. Its whole month is one session: a 26.6% jump on 7 August, and down since.

The rally's actual cause

Every one of the seven rose over the past 30 sessions, an equal-weighted 19.6%, so this was not two names carrying a group. The trigger was a rotation out of AI hardware into beaten-down software after Anthropic's $65bn run rate landed below expectations and a Wall Street Journal report tallied some $3tn of off-balance-sheet AI commitments at nine large tech firms. Salesforce added a JPMorgan upgrade to a $250 target on 19 August. These stocks were down 44% to 49% year to date before it started; Salesforce's 50-day average crossed above its 200-day on 19 August, its first bullish reading of the year.

The setup

Where it stands — Salesforce's agent revenue is now disclosed in dollars and growing, while its multiple against gross profit is below February's.

Would confirm — Q2 current remaining performance obligation growth holding at or above 14%, with gross margin near 77%.

Would invalidate — Agentforce ARR growth decelerating sharply, or subscription growth slipping back below 10%.

Watch next — Second-quarter results after the close on Wednesday 26 August; the $25bn repurchase settles in the third quarter.

Valuation — 5.48x trailing gross profit per share against 5.68x in February; 14.8x forward earnings versus 24.1x trailing.