Salesforce vs. Adobe: Which Cloud Software Stock Has an Edge?

Core Viewpoint - Salesforce is positioned as a stronger investment option compared to Adobe, driven by its focus on AI, unified platform strategy, and favorable earnings outlook [19]. Salesforce Overview - Salesforce dominates the customer relationship management market, maintaining the largest share according to Gartner [2]. - The company has expanded its platform through acquisitions, aiming to become a broader enterprise software provider focused on AI, data, and collaboration [3]. - AI is central to Salesforce's growth strategy, with the introduction of Einstein GPT in 2023 to enhance automation and customer experiences [4]. - The launch of Agentforce has generated $100 million in annualized revenues within two quarters, with over 4,000 customers utilizing it [5]. - Salesforce's annual recurring revenue (ARR) from Data Cloud has grown over 120% year over year [5]. - Despite an 8% year-over-year revenue growth in Q1 fiscal 2026, which is slower than previous years, adjusted EPS rose 6%, indicating operational soundness [6]. Adobe Overview - Adobe reported a 10% revenue increase to $5.71 billion in Q1 fiscal 2025, with non-GAAP EPS growing 13.4% to $5.08 [7]. - The company leads in creative software, with AI contributing significantly to growth, adding over $125 million in ARR last quarter [8]. - Adobe is expanding its AI offerings with tools like GenStudio and Firefly Services, aimed at enhancing marketing efficiency [9]. - The company plans to monetize Firefly through tiered pricing within Creative Cloud and is increasing sales efforts to various sectors [10]. - However, Adobe's second-quarter guidance indicates potential margin pressure, with expected non-GAAP EPS between $4.95 and $5.00, down from Q1 [11]. Earnings Estimates Comparison - Salesforce's earnings estimates have remained stable over the past 60 days, indicating confidence in its earnings stability [12]. - In contrast, Adobe's earnings estimates have been lowered, raising concerns about near-term profitability [12]. - Long-term earnings growth projections show Salesforce with a CAGR of 12.7%, slightly better than Adobe's 12.4% [14]. Price Performance and Valuation - Over the past year, Salesforce stock has increased by 26.7%, while Adobe shares have decreased by 7.5%, reflecting stronger investor confidence in Salesforce [16]. - From a valuation perspective, Salesforce trades at 6.32 times forward sales, compared to Adobe's 7.17 times, suggesting more upside potential for Salesforce [17].