Salesforce Declines 17% Over the Past Year: How to Play CRM Stock?

Salesforce One-Year Price Return Performance

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AI Concerns Weigh on Salesforce Stock

The rapid development of artificial intelligence (AI), particularly agentic AI, is one of the biggest concerns facing software companies. AI agents can increasingly perform tasks with limited human involvement, raising questions about the traditional software-as-a-service model.

Investors are worried that companies could eventually need fewer software users as AI takes over more business processes. This could put pressure on subscription-based revenue models that charge customers based on the number of users.

The broader economy is adding to these concerns. High interest rates, inflation and geopolitical uncertainty have made businesses more careful about technology spending. Enterprises are taking longer to approve large software deals, creating longer sales cycles across the industry.

Salesforce is exposed to these challenges because its business depends heavily on large enterprise customers. Slower IT budgets could make it harder to win new customers and expand existing contracts.

Still, Salesforce's recent performance suggests that the company's core business remains resilient.

CRM’s Revenue Growth Shows Signs of Stabilizing

Salesforce's slowing revenue growth has been a major concern for investors. As the company has grown larger, maintaining the rapid growth rates of its earlier years has naturally become more difficult.

Recent results, however, provide some reason for optimism.

First-quarter fiscal 2027 revenues increased 13.3% year over year. While this is well below Salesforce's earlier hypergrowth levels, double-digit growth is still meaningful for a company of its size.

Management expects double-digit revenue growth for the second quarter and full fiscal 2027. These forecasts are broadly aligned with Zacks Consensus Estimates.

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This indicates that Salesforce's business is not losing momentum as quickly as some investors might be fearing. The company's AI products could provide a new source of growth as traditional CRM growth matures.

Salesforce Is Evolving Beyond Traditional CRM

Salesforce is still the global leader in customer relationship management (CRM) software, according to Gartner. The company is increasingly positioning itself as a broader enterprise data and AI platform.

Its strategy combines customer data, collaboration tools, automation and AI. Acquisitions have played an important role in this transformation. Slack strengthened Salesforce's collaboration capabilities, while Informatica expanded its data management business. More recent acquisitions, including Doti AI and Spindle AI, are further strengthening its AI capabilities.

Agentforce is at the center of this strategy. In the first quarter of fiscal 2027, Agentforce annual recurring revenues (ARR) jumped 205% year over year to $1.2 billion. This is a strong signal that customers are showing real interest in AI-powered agents.

The broader AI and data business is growing even faster. Combined AI and Data ARR, including Agentforce, Data 360 and Informatica Cloud, reached $3.4 billion in the quarter, more than tripling from the year-ago period. Nearly half of Agentforce and Data 360 bookings came from existing customers. This is encouraging because Salesforce can generate more revenues from its large customer base without having to spend as much to acquire entirely new customers.

Given its continued focus on product innovation and market reach, Salesforce can turn this early AI momentum into sustained, large-scale revenue growth.

CRM’s Valuation Looks More Attractive

Salesforce's sharp stock decline has also brought its valuation down significantly. CRM currently trades at a forward 12-month price-to-earnings (P/E) ratio of 12.99, well below the sector’s average of 21.65.

Salesforce Forward 12-Month P/E Ratio

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Compared with peers, Salesforce also appears reasonably valued. SAP and Oracle trade at forward P/E multiples of 22.94 and 17.21, respectively, while Adobe trades at 10.03 times forward earnings. Although Adobe is cheaper, Salesforce's valuation looks attractive considering its improving growth profile and expanding AI business.

Conclusion: Hold Salesforce Stock for Now

Salesforce's more than 17% decline over the past year looks concerning, but the weakness needs to be viewed in the context of a broader software-industry selloff. Salesforce's underlying business continues to show signs of resilience.

Agentforce is gaining traction, AI and Data ARR is growing rapidly, revenue growth has improved, and the stock's valuation is now considerably more reasonable.

However, investors should not ignore the risks. Salesforce still faces questions about the long-term impact of agentic AI on traditional SaaS, slower enterprise technology spending and the company's ability to convert strong AI adoption into sustained revenue growth.

For now, these positives and risks appear reasonably balanced. Investors who already own Salesforce stock should hold CRM for now rather than sell into the weakness. New investors, meanwhile, should wait for clearer evidence that the AI opportunity is translating into durable financial gains.

Salesforce currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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