(Bloomberg)– Salesforce Inc. shares have never been cheaper, but investors are still not buying amid growing concerns that artificial intelligence will erode the company’s growth prospects.
The customer relationship management software maker reports earnings after the bell and recently talked about better times ahead, forecasting double-digit revenue growth in the coming years. However, Wall Street is not optimistic that the results will do much to change the cautious narrative surrounding the stock.
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“We need a change in sentiment for investors to take a look, and that will be driven by stability and improved top-line growth,” said Hilary Frisch, senior research analyst at ClearBridge Investments.
Salesforce’s stock price has been hit by pessimism all year, plunging nearly 30% in 2025, making the company the second-worst performer in the Dow Jones Industrial Average and placing it among the 25 worst in the S&P 500. Meanwhile, shares of software companies seen as AI winners, such as Microsoft Corp., Oracle Corp. and Palantir Technologies Inc., are booming.
The selloff brought the company’s stock valuation to the lowest since Salesforce’s IPO in 2004. The stock currently trades at 19 times estimated earnings for the next 12 months, well below its 10-year average of 47 and below the S&P 500’s multiple of around 22.
Shares rose 1.3% on Wednesday.
“If his predictions are true, then the valuation is not fair and likely represents an attractive opportunity for long-term investors,” Frisch said. “While I believe we will see this stability and improvement over the next 12 to 18 months, I don’t know if this report will be the catalyst for a change in the situation, as concerns about AI disruption remain very present.”
Although Salesforce’s forecast eased concerns about an impending slowdown, it did not address Wall Street’s main concern: offerings from AI-native companies like OpenAI would reduce demand for its services and its pricing power.
Salesforce has its own AI products, including Agentforce, which automates certain workloads. But investors aren’t yet expecting a big financial contribution from them, keeping the company’s perceived ability to thrive in the AI era in doubt. In a sign of Wall Street’s wait-and-see attitude, consensus estimates for the company’s profits and revenues for next year have not changed in 12 months.
“Even though there is high interest in Agentforce/Data Cloud, Agentforce production remains limited,” Citi analyst Tyler Radke wrote in a Nov. 26 note to clients. “We are awaiting broader deployments and commercialization evidence before considering becoming more constructive.”
The company isn’t the only one feeling the heat. Software as a service (SaaS) stocks have largely come under pressure this year due to concerns about AI disruption, with Morgan Stanley’s basket tracking the group down 12% in 2025.
In many ways, the market is ahead of itself, as the damage caused by AI is not yet visible in earnings reports. Salesforce is expected to post 11% net profit growth this fiscal year on 8.8% revenue growth. And both are expected to accelerate in each of the company’s next three fiscal years, with net profit up 20% by fiscal 2029 thanks to an 11% increase in revenue.
With this in mind, some Wall Street professionals believe these concerns are misplaced. The SaaS group is trading at a 30% to 40% discount to its fundamentals, according to a Nov. 24 research note from KeyBanc Capital Markets analyst Jackson Ader. Valuations “imply that growth is collapsing,” although the worst-case scenario is “unlikely” and “we think we will be pleasantly surprised,” Ader wrote.
Maybe he’s right. The average analyst price target for Salesforce over the next 12 months is around $325, implying a nearly 40% upside from its current price of $235 and placing it among the top 10 constituents of the S&P 500 Information Technology Index by that measure.
“The sentiment toward SaaS companies has gotten pretty draconian, but there are some companies that are mission-critical, and others where your business wouldn’t be shut down if you replaced them with AI,” said Brad Conger, who oversees $25 billion as chief investment officer at Hirtle Callaghan.
“Salesforce is closer to the mission critical side, and it’s one of the companies I think investors should consider, but there are no absolutes at the moment,” he added. “This remains a very mixed area, and it will take some time for companies to prove that they have defended themselves against AI – or that they can win.”
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Earnings expected Wednesday
–With help from Caleb Mutua, Subrat Patnaik, David Watkins and Stephen Kirkland.
