Quick Read
- Salesforce (CRM) stock has fallen 10% year-to-date and 24% in 2025.
- Investor fears about generative AI competition, like ChatGPT, are pressuring software stocks.
- Salesforce’s Agentforce AI platform generated $540 million in Q3 recurring revenue, up 330% year-over-year.
- Analysts suggest the stock is undervalued by approximately 42.7% based on discounted cash flow.
- The company projects revenue growth of 9.5% for fiscal 2026 and 11% for fiscal 2027.
Salesforce (CRM) stock has experienced a significant downturn, plummeting approximately 10% year-to-date and 24% throughout 2025, as investor fears intensify regarding the competitive threat posed by advanced generative artificial intelligence technologies like OpenAI’s ChatGPT. This slide has made Salesforce the worst-performing member of the Dow Jones Industrial Average so far this year, prompting the company to double down on its own AI initiatives, particularly its Agentforce platform, to reignite revenue growth and reassure a skeptical market.
Market Concerns Drive Salesforce Stock Decline
The software giant’s shares have been under considerable pressure, reflecting a broader market sentiment that questions the long-term viability and valuation of traditional software companies in the face of rapidly evolving AI capabilities. This ‘groupthink on the Street,’ as noted by Yahoo Finance, is not only impacting Salesforce but also other industry players like Adobe. The concern is that AI tools could significantly automate tasks currently handled by enterprise software, potentially eroding revenue streams.
In contrast to Salesforce’s struggles, longtime rival Microsoft (MSFT) saw its stock rise 14% in 2025, while the tech-heavy Nasdaq Composite advanced 20%. This divergence highlights the market’s current preference for companies perceived as leading the AI revolution or better positioned to integrate AI effectively without disrupting their core business models.
Adding to investor unease, Salesforce’s revenue growth has slowed to single digits after years of robust double-digit expansion. In the first, second, and third quarters of fiscal 2026, revenues increased 7.6%, 9.8%, and 8.6% year-over-year, respectively, according to Zacks. This deceleration, coupled with costly acquisitions like the $8 billion purchase of Informatica in May 2025 (after which the stock declined 13%), has fueled skepticism about the company’s financial discipline and growth trajectory.
Agentforce: Salesforce’s Bet on AI-Driven Growth
In response to these challenges, Salesforce is making a significant strategic pivot towards Agentic AI, with its Agentforce suite at the forefront. Agentic AI refers to systems capable of acting on behalf of users, automating tasks, generating insights, and accelerating decision-making. Salesforce has embedded these capabilities across its product portfolio to enhance workflow efficiency and predictability.
The Agentforce platform is showing promising early momentum. In the third fiscal quarter of 2026, Agentforce alone generated $540 million in recurring revenues, marking a substantial 330% year-over-year increase. Combined with Data Cloud, these AI-driven offerings contributed $1.4 billion in recurring revenues, up 114% from the previous year. Salesforce showcased Agentforce’s capabilities at its Dreamforce event last September, providing examples of its success in driving productivity for major clients like PepsiCo and Dell.
Booking trends also suggest growing adoption, with Salesforce ending Q3 FY26 with current remaining performance obligations of $29.4 billion, an 11% year-over-year rise, driven by larger deals and early renewals. Significantly, over 50% of Agentforce deals originated from existing clients, indicating successful cross-selling of AI features to its established user base.
Analyst Outlook and Valuation Perspectives
Despite the current stock performance, analysts offer a mixed but cautiously optimistic outlook. JPMorgan analyst Mark Murphy described the current period as a ‘complicated 12-18 month period of transition’ for Salesforce, suggesting that while internal metrics may be stabilizing, tangible improvements in traditional investor-focused metrics like revenue might not appear linearly. Murphy anticipates a potential rebound for Salesforce shares in the second half of the year.
Activist investor Starboard Value, which previously pushed Salesforce for changes three years ago to curb costly acquisitions and improve profit margins, still holds a position in the company. Starboard CEO Jeff Smith expressed confidence, stating that Salesforce is a ‘great, terrific, terrific company’ and an ‘AI beneficiary’ focused on profit margins, as reported by Yahoo Finance. Smith acknowledged that while Salesforce’s double-digit growth isn’t as high as some might desire, its performance has improved since Starboard’s initial engagement.
Furthermore, several analyses, including those by Forbes and Simply Wall St, suggest that Salesforce stock may be significantly undervalued at its current trading price of around $220. Based on discounted cash flow (DCF) models, the intrinsic value is estimated to be around $383.89 per share, implying an intrinsic discount of approximately 42.7%. This valuation perspective highlights Salesforce’s strong free cash flow (FCF) generation, with a nearly 32.0% FCF margin in the last twelve months and projections for a 44.9% margin by fiscal year 2026.
Salesforce has also taken steps to bolster investor confidence by raising its fiscal 2026 revenue and adjusted profit forecasts. Analysts now project revenues to increase 9.5% for fiscal 2026 and 11% for fiscal 2027, with earnings expected to rise approximately 15.3% and 10.5% for the respective years.
Competitive Landscape and Future Challenges
Salesforce is not alone in its aggressive push into enterprise AI. Competitors like Microsoft and ServiceNow are also heavily investing in AI automation. Microsoft has integrated powerful AI features into its Dynamics 365 platform through Copilot tools, leveraging its extensive existing customer base. ServiceNow’s Now Assist platform similarly uses AI to automate IT service management, customer support, and HR tasks, rolling out industry-specific AI tools akin to Salesforce’s Agentforce strategy.
Despite the strategic push and positive valuation signals, a tough road lies ahead. The market remains skeptical, demanding clear evidence that Agentforce can translate its impressive recurring revenue growth into substantial overall financial gains and contribute meaningfully to Salesforce achieving its ambitious fiscal year 2030 guidance. The company also faces calls for greater expense discipline. While Salesforce’s fundamentals appear solid, the risk of significant declines remains, particularly if broader market conditions deteriorate or if the company fails to execute consistently across its cloud segments.
The current market dynamics present a paradox for Salesforce: while its stock faces immediate pressure from AI competition and slowing growth, its strategic investments in Agentic AI and strong underlying financial health, including substantial free cash flow, position it as a potentially undervalued asset with significant long-term upside if its AI initiatives successfully drive sustained adoption and revenue reacceleration.