Salesforce, Inc. (NYSE:CRM): A Strategic Case for Undervaluation Amid AI and Cloud Megatrends

Salesforce, Inc. (NYSE:CRM) has long been a bellwether for the SaaS industry, yet its current valuation metrics suggest a compelling mispricing relative to its long-term growth prospects. As of December 2025, Salesforce trades at a Price-to-Earnings (P/E) ratio of 28.04, significantly below its 5-year average of 189.7x and the SaaS peer average of 54.4x. Meanwhile, its Price-to-Book (P/B) ratio of 3.9 is well below the Software (System & Application) industry's 10.73x, despite the company's dominant market position and AI-driven innovation. This divergence between fundamentals and valuation metrics raises the question: Is Salesforce undervalued, and if so, what catalysts could trigger a correction?

Valuation Metrics: A Historical and Industry Perspective

Salesforce's valuation volatility underscores its exposure to macroeconomic cycles. From January 2025 to December 2025, its P/E ratio fluctuated between 53.46 and 28.04, reflecting shifting investor sentiment. However, even at its December 2025 trough, the P/E of 28.04 remains above the US Software industry average of 31.7x, suggesting relative value. The Price-to-Sales (P/S) ratio, which dipped to 4.9 in 2022 before peaking at 9.5 in 2024, now stands at 5.7-a level consistent with CRM industry benchmarks for mid-sized revenue firms (5.7x for $1-5M revenue).

The most striking discrepancy lies in the P/B ratio. While Salesforce's book value-based valuation has ranged between 2.5 and 6.9 over the past three years, the broader Software industry trades at a P/B of 10.73x. This gap implies that the market may be underappreciating Salesforce's intangible assets, including its AI-driven platform and recurring revenue model.

Competitive Positioning: Leadership in CRM and AI Innovation

Salesforce's dominance in the CRM market is unassailable. According to IDC, the company holds a 20.7% market share, outpacing all competitors and leading in key regions such as North America, Latin America, and Asia-Pacific. Its Agentforce AI platform, which automates complex operations and enhances customer service, has become a critical differentiator. For instance, Agentforce reduced wait times by 40% in pilot programs and is now being adopted by governments for mission-critical AI-driven digital experiences.

The company's financial resilience further strengthens its case. Salesforce's cloud-based revenue model, bolstered by data integration and AI optimization, has enabled consistent growth. In 2025, 7% of its SaaS offerings were AI-enabled, aligning with the broader industry's shift toward generative AI. This strategic alignment positions Salesforce to capitalize on the $908.21 billion global SaaS market by 2030, which is projected to grow at an 18.7% CAGR.

Macroeconomic Tailwinds: AI and Cloud as Growth Catalysts

The AI and cloud computing sectors are experiencing unprecedented momentum, creating tailwinds for Salesforce. Global IT spending in 2025 reached $5.43 trillion, with AI, cloud, and cybersecurity driving a 9.3% year-over-year increase. Generative AI adoption has surged from 33% of companies in 2023 to 71% in 2024, while agentic AI investments are expected to grow from under $1 billion in 2024 to $51.5 billion by 2028.

Salesforce's AI initiatives are directly aligned with these trends. The company's Agentforce platform is already delivering cost savings in service operations and revenue gains in marketing, mirroring broader industry shifts. Meanwhile, cloud infrastructure spending-projected to double by 2028-supports Salesforce's hybrid and multi-cloud strategies, which are now adopted by 85% of enterprises. The U.S. GDP growth in H1 2025 was even attributed to AI infrastructure investments, with 92% of growth linked to AI data centers.

The Case for Strategic Entry

The confluence of undervalued metrics, leadership in AI/CRM, and macroeconomic tailwinds suggests a compelling entry point. Salesforce's P/E and P/B ratios are significantly below historical and industry averages, while its market share and AI integration position it to outperform peers in the next growth cycle. The market's current discounting of these fundamentals may stem from short-term volatility in SaaS valuations or underestimation of AI's long-term impact.

However, as AI transitions from experimental to enterprise-ready and cloud adoption becomes ubiquitous, Salesforce's valuation is likely to converge with its intrinsic value. Investors who recognize this mispricing now may benefit from a correction driven by earnings growth, AI-driven margin expansion, and sector-wide multiple re-rating.

Conclusion

Salesforce's current valuation appears to understate its long-term potential. With a 20.7% CRM market share, a leading AI platform, and alignment with $7 trillion in AI infrastructure spending, the company is uniquely positioned to capitalize on the next phase of digital transformation. For investors seeking exposure to AI and cloud megatrends at a discount, Salesforce offers a strategic opportunity to enter ahead of a potential valuation correction.