Salesforce Underperforms Market As Growth Concerns Plague CRM Giant

Salesforce CRM stock has significantly underperformed the broader tech market this year, plummeting nearly 22% while the S&P 500 Information Technology Sector Index has gained 9%.

This stark contrast arises as the cloud-based CRM leader, which primarily generates revenue from subscriptions and support, faces heightened competition from rivals like Microsoft MSFT and Oracle ORCL.

Despite reporting strong Q1 results and maintaining a leading market share, Salesforce is navigating analyst skepticism regarding its acquisition strategy and future growth momentum.

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Salesforce’s core business involves selling subscriptions to its cloud-based Customer Relationship Management (CRM) platforms and providing associated customer support services. This puts them in direct competition with various CRM and cloud-based software providers, notably Microsoft Dynamics 365 and Oracle.

During the pandemic, Salesforce quickly adapted to a fully digital, work-from-anywhere model, shifting 54,000 employees to remote work and reimagining every part of its operations.

As businesses raced to digitize, Salesforce saw record demand for its cloud services, driving revenue up 24% to $21.25 billion in fiscal 2021.

The company also joined the Dow Jones Industrial Average and signed a deal to acquire Slack, positioning itself at the center of the new digital workplace.

Salesforce led the global CRM market in 2024 with a 20.7% share, according to IDC, marking its 12th straight year as the #1 CRM provider.

It also held the top spot in North America, Latin America, Western Europe, and Asia-Pacific, and ranked #1 in Sales, Customer Service, and Marketing.

Financial Performance and Analyst Scrutiny

On May 28, the company reported first-quarter revenue of $9.83 billion, up 8% on a year-over-year basis, beating the consensus estimate of $9.75 billion.

Operating margin came in at 19.8%, or 32.3% on an adjusted basis. Salesforce repurchased $2.7 billion of its stock in the quarter and returned $402 million to shareholders through dividend payments.

Salesforce expects second-quarter revenue of $10.11 billion-$10.16 billion versus estimates of $10.01 billion. 

Analysts, including Kash Rangan of Goldman Sachs and Mark Murphy of JP Morgan, maintained bullish ratings after the company’s quarterly results but pointed to concerns over margins and future growth momentum.

DA Davidson analyst Gil Luria expressed skepticism over its $8 billion Informatica acquisition. He questioned the strategic value of adding a legacy company with a weak execution record to address Salesforce’s slowing organic growth.

Luria warned that Salesforce may rely more on acquisitions to mask this slowdown and doubted the Informatica deal would reignite innovation. While it could be financially accretive in year two, he viewed the move as part of a broader trend of covering growth gaps with bolt-on data deals.

On June 18, Salesforce announced it will raise prices by an average of 6% for its Enterprise and Unlimited Editions starting August 1. The hike will be attributed to expanded AI tools under its Agentforce platform to boost margins.

The increase affects key products like Sales Cloud and Service Cloud, as Salesforce rolls out Agentforce add-ons starting at $125/user/month and Agentforce 1 Editions at $550/month, offering unlimited generative AI use.

AI Integration and Outlook

In June, Salesforce CEO Marc Benioff said AI now handles up to 50% of tasks across key areas like engineering and support. In a Bloomberg interview, Benioff joked that he hopes AI could replace him someday, though he clarified the comment was partly tongue-in-cheek.

However, this week, Benioff rebutted fears of mass white-collar layoffs from AI, saying it will augment rather than replace jobs. At the 2025 AI for Good Global Summit, Benioff said AI will transform the workforce by enhancing human capabilities, not eliminating roles.

On June 9, Bank of America Securities analyst Brad Sills highlighted Salesforce’s growth in its core products and Agentforce platform despite some weakness in manufacturing and retail due to tariffs.

Sills highlighted that Salesforce’s COO and CFO, Robin Washington, acknowledged sector-specific challenges but pointed to broader momentum across its front-office applications, reflecting continued AI-driven growth and product expansion.

On June 24, BofA’s Sills said he expects Salesforce to be one of the key winners from the upcoming AI boom, driven by a surge in demand for agentic AI. The analyst noted Salesforce’s Agentforce platform as well-positioned to capitalize, citing its large customer base, strong data infrastructure, and early deployment of AI features.

BofA estimates global spending on agentic AI could hit $155 billion by 2030, far exceeding current forecasts. Sills believes companies like Salesforce will start meaningfully monetizing this wave beginning in 2026, as organizations move from pilot programs to full-scale deployment.

Price Action: CRM stock is trading higher by 1.02% to $260.70 at last check Monday.

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