ZACKSยท2025-10-22 14:35Core Insights - Salesforce and Adobe are leading companies in the cloud software sector, focusing on enhancing productivity, customer engagement, and digital transformation [1][2] - Both companies are heavily investing in artificial intelligence (AI) to drive future growth [2] Salesforce Stock Analysis - Salesforce is the top player in customer relationship management (CRM) and is expanding its ecosystem to include AI, data, and collaboration [3] - The introduction of Einstein GPT has integrated generative AI into Salesforce's offerings, aiding in process automation and decision-making [4] - The latest AI-driven innovations, such as Agentforce and Data Cloud, generated $1.2 billion in recurring revenue in Q2 of fiscal 2026, marking a 120% year-over-year increase [5] - In Q2 of fiscal 2026, Salesforce reported a 9.8% increase in revenues and a 13.7% rise in non-GAAP EPS, exceeding Zacks Consensus Estimates [6] - The total remaining performance obligation (RPO) reached $59.9 billion, a 10% increase year-over-year, indicating steady growth expectations [7] - Salesforce is transitioning to a more efficient and profitable enterprise solution provider while maintaining a focus on innovation [8] Adobe Stock Analysis - Adobe leads the creative software market and is focusing on its AI strategy with Firefly, which is trained on licensed and public content to mitigate copyright issues [9] - The launch of Acrobat Studio in September 2025 combines various tools into a productivity hub, showcasing Adobe's commitment to practical applications [10] - Adobe's AI partnerships and collaborations with major cloud providers are expanding its market presence, including a deal with the Premier League [12] - In Q3 of fiscal 2025, Adobe's revenues grew by 10.7%, and non-GAAP EPS increased by 14.2%, but concerns about sustainable growth due to rising competition are present [13] - Adobe's new AI initiatives contributed approximately $250 million in revenues, representing only about 4% of total revenues, indicating challenges in AI monetization [14] Growth Outlook Comparison - Near-term growth estimates suggest Adobe may have a slight edge, with projected revenue growth of 10% and EPS growth of 12.8% for fiscal 2025, compared to Salesforce's 8.8% revenue and 11.3% EPS growth for fiscal 2026 [15] - Long-term growth projections favor Salesforce, with expected earnings CAGR of 13.9% over the next five years versus 13.1% for Adobe [16] Price Performance and Valuation - Over the past year, Salesforce's stock has declined by 7.4%, while Adobe's stock has dropped by 26.3%, indicating stronger investor confidence in Salesforce [17] - Salesforce trades at 21.43 times forward 12-month earnings, while Adobe trades at 15.36 times, with Salesforce's premium justified by its AI traction and profitability [19] Conclusion - Salesforce is positioned as the better investment option due to its clearer path to AI monetization, stronger customer retention, and better margin stability compared to Adobe [21][22]