Better stock of business software: ServiceNow vs. Salesforce

In the coming quarters, AI-powered tools and digital agents will also make their presence known in Salesforce’s other products and services. The lessons learned from customer interactions will help Salesforce run its own business, and vice versa.

Long story short: Salesforce may be on the cusp of a whole new growth spurt, depending on whether customers embrace or reject the Agentforce idea.

In ServiceNow’s third quarter earnings call, ServiceNow CEO Bill McDermott highlighted several factors driving his business forward.

Chief among them is the need for the entire economy to clean up and modernize a hodgepodge of information technology systems, which have emerged over decades from competitive systems and internal development. McDermott sees ServiceNow as the clear leader in this effort, driven by the company’s long operating history and new generative AI tools. In many ways, ServiceNow’s recently released Xanadu platform reminds me of Salesforce’s Agentforce, but this version comes in dozens of industry-specific flavors.

And ServiceNow is already taking the next step into the AI-powered future.

“ServiceNow AI agents can uniquely go beyond prompt-based activities and achieve deep contextual understanding,” said McDermott. He then explained what this jargon means in plain English: “This is like hiring extra workers to support people doing the jobs they never wanted to do in the first place.”

This is ServiceNow’s way of leveraging its AI capabilities and trying to stay a few steps ahead of bigger, but perhaps slower-moving rivals like Salesforce.

I expect both Salesforce and ServiceNow to deliver excellent business results as the AI ​​boom continues. At the same time, ServiceNow appears to have already priced much of its potential growth into the stock. Salesforce could double or triple its stock price without boosting its business — and still appear affordable next to its smaller rival.

So ServiceNow seems like a solid “hold,” or a promising target for small, speculative bets on the idea of ​​a digital workforce. But Salesforce is the clear winner, as its promising AI-driven growth efforts come with a much more affordable stock price. To borrow a quote from Warren Buffett, this is the “great company at a fair price” you should prefer for your long-term investments.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Salesforce and ServiceNow. The Motley Fool has a disclosure policy.

Better Business Software Stock: ServiceNow vs. Salesforce was originally published by The Motley Fool