Salesforce (CRM – Get Rating) and Adobe (ADBE – Get Rating) are ahead of the curve when it comes to profitability and margin expansion within the software application space. Both companies have embraced Artificial Intelligence (AI) and integrated the technology into their product offerings.
Outside of a pure play on AI such as Nvidia (NVDA), Salesforce and Adobe are stealth AI plays that will enable growth verticals across their respective ecosystems in the years to come.
Each stock offers a unique investing proposition blend that we will explore further below.
Salesforce (CRM – Get Rating)
Salesforce has undergone a massive business transformation to reward shareholders via cost reductions, gross margin expansion, share repurchases and new AI-enabled growth initiatives. Earlier this year the company slashed 10% of its workforce as part of a restructuring plan and reigned in costs to streamline its business. Activist investors jumped into the fray to unlock value via accelerating growth and expanding profit margins. As such, Salesforce reached its goal of 30% adjusted gross margin three quarters earlier than planned.
Salesforce released AI enhancements to its Sales Cloud and Service Cloud applications for $50 per person per month on top of existing costs. The company also announced its AI Cloud that will encompass tools for marketing and data analysis.
The new AI Cloud aims to improve customer experiences and company productivity by bringing together AI, data, analytics, and automation to provide trusted, open, real-time generative AI. AI Cloud comes with Einstein GPT Trust Layer for enterprise AI which offers the benefits of generative AI while providing data privacy and data security.
In its latest earnings, results and guidance came in stronger than expected and the company delivered growth in all five of its product categories and CEO Marc Benioff forecasted expansion ahead through artificial intelligence, “We’re leading our customers into the new AI era”.
Taken together…
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