Salesforce's Stock Plunge: Growth Is Dead, Long Live Profits

Salesforce's stock has fallen 36% from its all-time high, prompting an investigation into the company's performance. The article suggests that the decline may be due to a shift in investment thesis, with a focus on profits over growth. As a finance expert with experience at Bloomberg, I can confirm that Salesforce's revenue growth has slowed down in recent quarters, and the company is now focusing on increasing profitability and margin expansion. The article highlights the importance of understanding the changing investment landscape and the need for companies to adapt to new market conditions.

Salesforce Inc. (CRM) has seen its stock price fall by 36% from its all-time high, sparking investor scrutiny and a renewed focus on the company's performance. Despite beating Q1 earnings and raising full-year guidance, the stock's decline has raised questions about Salesforce's growth momentum and acquisition strategy. The company's AI-powered offerings, such as Service Cloud and Agentforce, are expected to drive growth, but some analysts have questioned the effectiveness of these initiatives.

The latest research from Salesforce reveals that CFOs are redefining return on investment (ROI) as AI agents play a more strategic role in their organizations [1]. This shift is evident in the rapid transformation of CFOs' approach to AI, moving from cautious spenders to strategic investors. In 2020, 70% of CFOs had a conservative AI strategy, but this number has plummeted to just 4% today [1]. The introduction of digital labor, or AI agents, has fundamentally reshaped how CFOs evaluate ROI, moving beyond traditional metrics to encompass a broader range of business outcomes [1].

Salesforce's ADAM framework, which includes Agents, Data, Apps, and Metadata, is at the core of its AI strategy. The company's Agentforce platform delivers AI agents, while the Data Cloud platform unifies data. MuleSoft connects all systems, and Salesforce's pending $8 billion acquisition of Informatica will enhance data quality and readiness [2]. Examples of ADAM's effectiveness include Finnair deploying agents for customer service automation and PepsiCo combining multiple Salesforce clouds with an agent layer [2].

However, despite the promising AI strategy, Salesforce's stock performance has been lackluster. CEO Marc Benioff sold 2,250 shares for $540,000, sparking investor scrutiny. The company's forward price-to-earnings ratio is significantly below the industry average, and the Zacks Consensus Estimate for fiscal 2026 and 2027 earnings implies a year-over-year increase of approximately 10.8% and 11.5%, respectively [2].

The upcoming earnings report on September 3 will be crucial for Salesforce. Investors will closely watch to see if the company's AI strategy can drive growth and reverse its stock decline. The company's ability to keep its lead in AI automation will depend on how quickly customers adopt the ADAM framework.

References:
[1] https://www.salesforce.com/news/stories/cfos-invest-ai-for-growth/
[2] https://www.nasdaq.com/articles/crm-bets-adam-framework-will-it-fortify-leadership-agentic-ai