Salesforce (NYSE:CRM) has become one of the biggest casualties of the 2026 rotation away from slower-growing enterprise software. The company increasingly looks like a contrarian value opportunity within large-cap technology. Despite continuing to generate strong profits and free cash flow, investors have increasingly questioned whether the company can deliver enough AI-driven growth to justify its previous premium valuation.
The sell-off has been severe. The shares have fallen by around 40% this year and recently touched fresh 52-week lows around $160 before falling further, despite quarterly earnings beating expectations.
| Salesforce (NYSE:CRM) | Price: $155.02 (-40% 1-year) | Market cap: $126.96bn |
Why has the share price fallen?
1. Investors are worried AI will disrupt Salesforce’s core business
The biggest concern is that generative AI agents could reduce demand for traditional CRM software.
Historically Salesforce charged companies for software used by human sales and customer service staff. Investors now worry that AI agents may automate many of those workflows, reducing licence growth over time.
Management argues that products such as Agentforce will create a new revenue stream rather than cannibalise existing business, but investors remain unconvinced.
2. Guidance disappointed despite earnings beat
The latest quarterly results exceeded analyst expectations for both revenue and earnings.
However:
- Full-year revenue guidance was only modestly increased.
- Management remained cautious about the pace of enterprise IT spending.
- Investors had hoped AI adoption would accelerate growth much faster.
That combination caused another sharp sell-off.
3. Growth has slowed
Five years ago Salesforce regularly produced revenue growth above 20%.
Today the business is growing at around high-single digits to low-double digits.
For many investors that raises a difficult question:
Should Salesforce still command a premium software valuation?
4. Competition has intensified
Salesforce now faces stronger competition from:
- Microsoft (Copilot ecosystem)
- ServiceNow
- Oracle
- HubSpot
- AI-native software startups
Many investors believe the competitive moat is becoming less secure than it was several years ago.
5. Rotation out of software
2026 has generally favoured:
- AI infrastructure
- Semiconductor companies
- Cloud infrastructure providers
Traditional SaaS companies have largely underperformed as investors chase faster AI beneficiaries.
Reasons for optimism
Although sentiment is weak, the investment case remains strong in several respects.
Huge cash generation
Salesforce remains one of the most profitable software companies globally.
| Metric | Position |
| Annual revenue | ~$41bn-$42bn |
| Free cash flow | ~$14bn+ |
| Gross margin | ~78% |
| Operating margin | Among highest in enterprise software |
Unlike many AI companies, Salesforce does not need external capital to fund investment.
AI is beginning to generate revenue
Management says:
- Agentforce annual recurring revenue has tripled.
- Customer adoption continues to increase.
- AI products are now contributing meaningful new bookings.
The recent acquisition of AI customer-service platform Fin also shows management is prepared to invest aggressively in AI automation.
Shareholder returns
Salesforce continues to:
- repurchase shares
- generate substantial excess cash
- maintain a very strong balance sheet
Those buybacks become increasingly attractive as valuation falls.
What analysts are saying
Most Wall Street analysts remain positive despite reducing price targets.
Current consensus remains around Moderate Buy, with average targets substantially above the current share price, although several firms have trimmed expectations following cautious guidance.
Bullish view
Analysts who remain positive argue:
- AI monetisation is underestimated.
- Agentforce could become a major platform.
- Current valuation already discounts much slower growth.
- Free cash flow remains exceptional.
Bearish view
Sceptics believe:
- CRM software risks commoditisation.
- Microsoft has stronger AI positioning.
- Growth may remain stuck in single digits.
- Premium multiples are unlikely to return.
Valuation compared with peers
| Company | Growth outlook | Approx valuation | Comments |
| Salesforce | ~10% | ~10x earnings | Lowest in several years |
| Microsoft | Low-double digits | Higher multiple | Premium reflects AI leadership |
| ServiceNow | Mid-20% | Significant premium | Faster growth |
| Oracle | Low-double digits | Similar/slightly higher | AI cloud momentum improving |
| Adobe | High-single digits | Similar range | AI execution also under scrutiny |
Compared with both its software peers and the wider US market, Salesforce now trades at one of its lowest relative valuations in years.
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Biggest risks
- AI adoption disappoints
- Further slowing enterprise IT spending
- Increased pricing pressure
- More aggressive competition from Microsoft
- Large acquisitions fail to deliver expected synergies
Biggest opportunities
- Agentforce becomes a major profit driver
- Cross-selling AI across its vast customer base
- Higher operating margins
- Continued share buybacks
- Multiple expansion if investor confidence returns
Investor verdict
The market has shifted from viewing Salesforce as a premium growth company to treating it more like a mature software business facing AI disruption.
That may prove too pessimistic.
The company still enjoys:
- a dominant enterprise customer base,
- outstanding free cash flow,
- high margins,
- and significant financial capacity to invest in AI.
The key question is whether management can demonstrate that AI creates incremental revenue rather than replacing existing software demand. If Agentforce and related products gain traction over the next 12–18 months, today’s valuation could prove attractive. If growth remains stuck in the high-single digits, however, the shares may continue to trade at a discount to faster-growing software peers.
For UK retail investors, Salesforce increasingly looks like a contrarian value opportunity within large-cap technology rather than a classic high-growth software stock. The investment case now depends less on rapid revenue expansion and more on whether AI can restore sustainable growth while the company’s strong cash generation supports buybacks and long-term shareholder returns.
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