Salesforce's AI Pivot: A Buying Opportunity in the CRM Tech Storm?

Salesforce's Q1 2025 earnings revealed a company at a crossroads: its core CRM revenue growth slowed to 11%, yet its AI-driven initiatives—like Einstein and Agentforce—are positioning it for a multi-year growth wave. With shares down 17% post-earnings and trading at a 6.7x FY26E revenue multiple (below peers like Microsoft and Oracle), investors are debating whether Salesforce's undervalued stock presents a rare entry point. Let's dissect the data and risks to determine if this is a buy now or a gamble on overhyped AI.

The AI Growth Engine vs. Near-Term Headwinds

Salesforce's Q1 results underscored two realities:
1. Slowing CRM Adoption: Subscription revenue grew 12% YoY, but FY25 guidance was lowered to "slightly below 10%". Analysts cite prolonged deal cycles and budget scrutiny in enterprise tech, with Salesforce's CRM tools facing pricing transparency pressures.
2. AI-Driven Momentum:
- Agentforce AI has 3,000 paid deals since October 2024, resolving 84% of conversations autonomously. By 2026, this alone could add $500M+ in annual revenue.
- Data Cloud, now a $1B business, processes 250+ petabytes of customer data, underpinning Einstein's predictive analytics and personalized customer experiences.
- Einstein's Enterprise Traction: Saks, FedEx, and Siemens are using Einstein 1 Platform to unify data and automate workflows, reducing costs by 92% in service teams.

The question is: Can AI offset the CRM slowdown? Salesforce's valuation suggests investors are skeptical. But let's compare it to peers.

How Does Salesforce Stack Up Against CRM Rivals?

HubSpot (HUBS):
- Q1 Revenue: $714M (+16% YoY), with 258K customers (+19%).
- AI Play: Customer Agent is driving adoption, but HubSpot's AI lacks Salesforce's enterprise-grade data moats. Its stock trades at 14x FY26E revenue—double Salesforce's multiple—despite smaller scale.

Freshworks (FRSH):
- Q1 Revenue: $196M (+19% YoY), outperforming Salesforce.
- AI Momentum: Freddy Copilot has 2,200 customers, with a 50% attach rate on deals >$30K.
- Valuation: Trades at 11x FY26E revenue, but its EX (Employee Experience) segment is scaling faster.

Salesforce's 6.7x revenue multiple is a discount, but its AI roadmap—targeting $40.83B in FY2026 revenue—suggests long-term dominance. Unlike Freshworks or HubSpot, Salesforce's $63.4B RPO (Remaining Performance Obligation) and $13.1B operating cash flow give it the financial muscle to out-invest rivals in AI R&D.

The Case for Buying Now: Analysts See a 40% Upside

Salesforce's stock trades at $240, far below the $363.95 average analyst target. Key catalysts include:
1. AI Revenue Acceleration: By FY2027, AI could contribute ~$32B to revenue (up from $900M ARR today).
2. Margin Expansion: Operating margins jumped to 19% in FY2025, up from 2% in 2022, as AI automates workflows and reduces costs.
3. Undervalued Cash Flow: With $12.4B in free cash flow (up 31% YoY), Salesforce can buy back shares ($9.3B returned in FY2025) or acquire AI startups to bolster its platform.

Even if near-term CRM growth stays sluggish, Salesforce's AI could redefine the CRM market. 85% of service teams using Einstein report time savings, and 67% of consumers prefer AI agents to avoid repetitive interactions. This is a secular shift, not a fad.

The Risks: Why the Market Is Skeptical

1. CRM Demand Volatility: Enterprises may delay CRM upgrades in a recession, hitting Salesforce's core business.
2. Competitor Pressure: Microsoft's Dynamics 365 and Oracle's AI tools are encroaching on Salesforce's turf.
3. AI Monetization Hurdles: While Einstein's features are embedded in CRM, revenue attribution remains opaque. Investors want clearer metrics on AI's financial contribution.

Final Analysis: A Bottom-Fishing Opportunity?

Salesforce's Q1 stumble is a blip in its AI transformation. At 6.7x revenue, it's priced for failure—but its data assets, $36B cash flow, and enterprise-grade AI stack are unmatched. While rivals like Freshworks and HubSpot are growing faster, none have Salesforce's scale or the moat of 26.4B in RPO.

The stock's 20% post-earnings drop has created a rare entry point. If AI adoption hits Salesforce's FY2026 targets, the stock could rally 40%+ to $360. Even if growth is slower, its fortress balance sheet and cash returns (including a new dividend) provide a safety net.

Bottom Line: Salesforce's AI pivot is the real deal. The Q1 dip is overdone—buy the dip now before the market realizes AI is the new CRM.