Salesforce stock posted a fractional weekly gain on Friday, kind of a good sign ahead of next week’s Dreamforce conference.
But Salesforce (CRM) is kicking off its big AI event as it grapples with a puzzle: the tech titan pounced early on the AI megatrend. So why doesn’t Wall Street seem to be that impressed?
Salesforce stock shed 1.5% to close at 241.68 on Friday. But the shares ended the week up a fraction, snapping a two-week losing streak. But Salesforce stock has been sliding, down roughly 28% year to date. The stock’s Relative Strength rating stands at 15, down from 74 a year ago, according to IBD MarketSurge.
Salesforce Stock: Spotlight On Dreamforce
Not surprisingly, next week’s Salesforce event will focus on the megatrend for which the tech giant emerged as a major cheerleader: AI.
Dreamforce promises to help businesses “cut through the AI hype and develop a clear strategy,” highlighting Salesforce’s projected role as a trailblazer in the age of agentic AI.
But Salesforce’s AI offensive has gotten mixed reviews at a time when the company’s performance has been uninspiring.
Brian White, analyst with Monnes Crespi Hardt, said the company is certainly “well positioned” in AI given its “strong cloud portfolio and new innovations.”
But White, who has a neutral rating on Salesforce stock, pointed to “growing concerns over the long-term implications of the generative AI movement” on the software-as-a-service space where Salesforce is a major player.
Uninspiring Growth
“The company’s lackluster quarterly results have only intensified this concern,” White said in a client note. “Growth is uninspiring, competition dynamic, software in transition, and the macro remains treacherous.”
Gil Luria, head of technology research at D.A. Davidson, echoed this view, saying Salesforce’s core businesses “have decelerated very significantly over the last couple of years.”
“The technology is legacy technology, and they’re being displaced by many other companies,” he told Investor’s Business Daily. “There’s a whole cottage industry of companies that are just taking business away from Salesforce. That’s the problem.”
Meanwhile, Salesforce’s AI game plan is under scrutiny. The company was among the prominent enterprise software companies to tout the rise of “agentic AI,” in which AI will play an increasingly bigger role in running the applications for businesses and large organizations.
Other major tech companies, including Microsoft and Google, have been talking about this trend ever since ChatGPT triggered the craze over AI nearly three years ago. Salesforce’s push for agentic AI is considered one of the most aggressive.
Salesforce “certainly didn’t invent the term but they sure worked hard at popularizing it,” Crawford Del Prete, president of International Data Corp., told IBD. “The noise that Salesforce put out, we can argue about whether theirs was the loudest or the second loudest. But they were up there.”
Salesforce Stock: Too Early On AI?
But despite its high-profile evangelization for the trend, Salesforce’s AI offensive hasn’t wowed Wall Street. Del Prete pointed to a key reason: timing.
“They made a significant bet on agents and they pivoted the company to agents,” he said. “The downside of doing that is that they were probably a little bit early. A lot of enterprises were sort of just getting started in their journey. Salesforce needed to do a significant amount of missionary work around having people understand and having people be able to digest large language models and generative AI, let alone agents.”
Salesforce is waging this campaign at a time when competition is getting more intense. The battle appears to even threaten the company’s core software-as-a-service business, some analysts argue.
In a recent note, BNP Paribas analyst Stefan Slowinski described investor sentiment for Salesforce as “negative.” He cited the threat posed by OpenAI.
“We are seeing large longtime investors claiming they are significantly reducing positions,” he wrote. “Looks like capitulation on the recent speculation OpenAI may enter the CRM (customer relations management) SaaS market more formally,” Sowinski wrote. “Hard to see how Dreamforce will be a catalyst on ‘optimism alone.'”
“What would make investors more comfortable?” Slowinski asked. “A commitment to see subscription revenue growth accelerate in FY’26 or a bridge on what Agentic AI and consumption will do to the revenue outlook.”
Salesforce beat estimates when it posted results last month. But the outlook disappointed Wall Street, sparking a sell-off.
Was AI Push A Factor?
Luria of D.A. Davidson cited Salesforce’s AI offensive as a factor for the company’s ho-hum performance.
“Instead of investing in those core businesses — sales cloud, marketing cloud, service cloud — instead of investing in updating the technology there and staying at the forefront either through acquisition or rebuilding the product, they’ve been distracted by the shift to AI,” he said. “They’re having some early success (with AI), but they dropped the ball on the vast majority of their business.”
Del Prete rejects the view that Salesforce’s sharper focus on AI caused the company’s problems. The company was already facing challenges in a maturing industry even before ChatGPT sparked the AI craze, he says.
“Salesforce has already been through periods where they’ve been struggling with growth and struggling with expectations,” he said. “I think that it’s less about them taking their eye off the ball and more about trying to push that next generation and be the evangelists for that next generation of growth. Frankly, I think they were early. And I think that the core business didn’t get the benefit from agents yet that ultimately they’re pushing for it to get.”
AI As SaaS Threat
Del Prete also downplayed the view that AI is an immediate threat to software-as-a-service.
“I believe AI can be a tremendous force accelerator for companies like Salesforce and companies like Workday (WDAY) and maybe new applications or SaaS companies that come out,” he said. “But the narrative that SaaS is dead because people are just going to sit there with their keyboard and do the same stuff as SaaS, I don’t buy it. I think we’re a long way away from that.
Luria echoed this view, saying, “The reality is that a vast majority of software companies’ business has been mostly unaffected by AI so far.”