Salesforce (CRM): Riding AI Waves Through Rough Waters – A Long-Term Play

Salesforce (CRM) has faced turbulence in recent quarters, with revenue misses, margin pressures, and leadership changes rattling investor confidence. Yet beneath the near-term headwinds lies a company positioned to capitalize on a $740 billion AI-driven opportunity by 2028. For investors with a multi-year horizon, the current dip presents a rare chance to buy a software giant primed for reacceleration. Here's why the long-term opportunity outweighs the short-term noise.

Near-Term Challenges: Stormy Seas, but Steady Navigation

Salesforce's Q1 FY2025 results revealed the headwinds it faces. Revenue of $9.13 billion marked an 11% year-over-year increase—below Wall Street's $9.17 billion estimate—triggering a 20% share selloff. Management cited a $300 million foreign exchange drag and stagnant professional services revenue (up just 1% Y/Y) as factors. Meanwhile, the CFO transition—Amy Weaver's departure and her transition to an advisory role—raised concerns about leadership continuity.

Yet Salesforce's financial foundation remains robust. Free cash flow surged 43% Y/Y to $6.08 billion, and the company maintained its full-year revenue guidance of $37.7–$38.0 billion. New leadership appointments—including Miguel Milano as Chief Revenue Officer and Ariel Kelman as Chief Marketing Officer—signal a focus on aligning operations with growth priorities. Even as Citigroup cut its price target to $320 (from $335), Salesforce's RPO (recurring revenue backlog) grew 10% Y/Y to $26.4 billion, underscoring customer commitment.

Long-Term Opportunities: The AI-Driven Tidal Wave

Salesforce's true edge lies in its AI initiatives, which are already generating tangible momentum:
- Data Cloud: Now managing 250+ petabytes of customer data, it's Salesforce's fastest-growing product, adding over 1,000 customers each quarter.
- Agentforce: This generative AI platform boasts 3,000 paying customers in just 90 days, with multi-cloud deals (including Data Cloud) accounting for 25% of deals over $1 million.
- Strategic Ecosystem: The Zero Copy Partner Network with AWS, Databricks, and Microsoft ensures seamless data integration, amplifying Data Cloud's utility.

Analysts project Salesforce's AI TAM to hit $740 billion by 2028, driven by demand for unified data platforms and autonomous agents. Salesforce's Data Cloud is uniquely positioned to capitalize on this, as it already serves 200,000 customers and integrates with 250+ third-party systems. CEO Marc Benioff's vision—embedding AI across Sales, Service, and Marketing Clouds—is starting to pay off, with AI tools now driving 12% of Subscription & Support revenue.

Valuation: A Discounted Ticket to Future Growth

GuruFocus's intrinsic value estimate of $291.60 (4.5% upside from current prices) contrasts sharply with Wall Street's average $362.89 price target (30% upside). This divergence reflects skepticism about Salesforce's ability to translate AI into top-line growth—yet the data suggests this skepticism is overdone.

Even Citigroup's lowered target of $320 implies a 15% upside, while bullish analysts see a $442 high. Salesforce's 6.48x forward P/S ratio lags peers like SAP and Oracle, despite its AI leadership. The recent dip—driven by macro concerns and management changes—has created a mispriced entry point for investors willing to look past short-term volatility.

Risks, but Not Dealbreakers

• Margin Pressures: Professional services revenue stagnation and rising R&D spending could weigh on margins. However, Salesforce's 33.7% non-GAAP operating margin in Q2 FY2025 shows discipline in cost management.
• Competitive Threats: Microsoft's Dynamics 365 and ServiceNow's AI push loom large. But Salesforce's Data Cloud scale and partnerships provide a defensible moat.
• Execution Risk: The CFO transition and recent insider selling (executives sold shares in April 2025) warrant monitoring. However, Weaver's advisory role ensures continuity, and Salesforce's $6.25 billion quarterly operating cash flow provides ample cushion.

Conclusion: A Multi-Year Call to Action

Salesforce's near-term challenges—revenue misses, margin pressures, leadership changes—are real but manageable. The company's AI-driven roadmap, fueled by Data Cloud and Agentforce, positions it to dominate the $740 billion TAM in AI-enabled CRM.

While GuruFocus's modest valuation upside highlights short-term risks, Wall Street's consensus and Salesforce's cash flow suggest the stock is undervalued. Investors with a 3–5 year horizon should view the recent dip as a buying opportunity. Even a conservative 15% upside to Citigroup's lowered target offers compelling returns, while upside to $360+ is achievable if AI adoption accelerates.

The seas may be choppy now, but Salesforce is charting a course to long-term dominance. This is a play for patient investors who recognize that AI's promise often outpaces quarterly noise.