Jim Cramer Explained Why Salesforce Inc. (NYSE:CRM)’s Shares Rose Ahead Of Earnings

On August 27th, Salesforce Inc. (NYSE:CRM) shares experienced a significant 21% increase following its second quarter earnings report. The company announced $11.35 billion in revenue and $5.90 adjusted earnings per share, both surpassing analysts' expectations. Notably, Salesforce's free cash flow grew by 81% to $1.1 billion. A key highlight was the $1.5 billion annual recurring revenue of the firm's Agentforce platform.

In the days leading up to the earnings release, Jim Cramer discussed Salesforce's stock sentiment, which proved inaccurate. While ServiceNow, another company mentioned in the report, saw a 27% rise after reporting, Salesforce's strong performance suggested a growing interest in non-data center tech stocks. Despite challenges in AI-related revenue, Salesforce's management remains optimistic about the AI-based Agentforce platform's growth potential.

However, three points out of the 11-point full-year revenue growth came from the non-AI Informatica platform, indicating a potential slowdown. Meanwhile, ServiceNow reported a 20% backlog growth for the third quarter, but a 22.5% subscription growth forecast for next year hinted at a slowdown. ServiceNow's forward P/E multiple is higher than Salesforce's, but the hedge fund preference for CRM with a lower short interest percentage suggests investors value the latter more.