Salesforce (CRM) reported stronger-than-expected fiscal Q3 earnings, showing signs that its push into artificial intelligence is paying off. Morgan Stanley said Thursday in a report.

The company's current remaining performance obligation rose 11% from a year earlier, or two percentage points higher than some forecasts, the report said.

A big driver of the growth was Agentforce, Salesforce's new AI-powered platform that helps companies automate customer service and sales tasks, Morgan Stanley said. Annual recurring revenue from Agentforce has topped $500 million, and the company has closed 18,500 deals for the product, up 50% from the prior quarter, the report said.

Morgan Stanley said Salesforce's fundamentals are improving, pointing to growth in new customer orders. As current challenges ease, Salesforce may benefit from a stronger rebound in bookings by 2027, the report said.

The company is also returning more cash to shareholders. Capital returns, through buybacks and dividends, rose to $4.2 billion from $2.6 billion in Q2, and Salesforce plans to boost shareholder payouts by 50% in H2 2026, the report said.

Morgan Stanley maintained its overweight rating on Salesforce stock with a $405 price target.

Salesforce shares rose 1.4% in recent Thursday trading.

Price: 242.06, Change: +3.34, Percent Change: +1.40