Salesforce won’t be discarded in the AI boom, but what companies want is changing
Companies won’t completely abandon Salesforce in the age of AI, but they are changing the way they use it and their expectations. According to Morgan DeBaun, CEO and co-founder of digital media group Blavity, the cost savings provided by artificial intelligence are an important factor determining Salesforce’s forward-looking outlook. Blavity, which aims to serve Black audiences, spends about $1 million a year on enterprise software from about a dozen vendors, including Salesforce. When his current six-figure contract expires in early 2027, DeBaun plans to replace Salesforce’s customer relationship management (CRM) platform with a more cost-effective AI solution. He said the move would result in savings of at least 50% to 60%. DeBaun told CNBC he doesn’t plan to cut ties with Salesforce completely. It wants to keep Slack, which Salesforce acquired for about $28 billion in 2021, because rebuilding a workplace messaging platform in-house is too expensive and complicated, even with artificial intelligence. Last week, Salesforce announced new AI features for Slack, following a major agency update in January. But DeBaun doesn’t want to pay Salesforce or any other enterprise software vendor more money for AI features. “I would expect AI features to be included in their core offerings,” he explained. “What they’re all doing is trying to force us to use AI features that should naturally be unique to their products.” He added that higher prices for AI do not translate into better efficiency. The shift reflects a broader debate on Wall Street about whether applications built using AI coding assistants from newcomers like Anthropic and OpenAI will disrupt traditional enterprise software companies like Salesforce. AI disruption concerns have crushed software stocks this year as investors adopt a sell-first, ask-questions-later approach. While AI tools have made it easier for companies to create custom CRM and data management systems, many businesses like Blavity still rely on Salesforce’s broader ecosystem of products. Taken together, it suggests that new AI tools could reshape rather than eliminate the enterprise software business. The idea that software and software as a service can be ignored in the age of artificial intelligence is quite absurd. Salesforce CEO Marc Benioff Marc Benioff, the outspoken CEO and co-founder of Salesforce, has long maintained that AI is good for business, not a threat. “The idea that software and software as a service can be ignored in the age of artificial intelligence is pretty ridiculous,” Benioff told Jim Cramer on “Mad Money” last week. According to Benioff, the new paradigm is how AI and software can work together to help companies, using Slack as an example. “We acquired Slack five years ago, and it was an incredible company, but it has become an even better product. We also tripled our revenue in that five-year period… We expect to generate approximately $3 billion in revenue from Slack this year.” The impact of enterprise software is twofold: (1) AI tools like Salesforce’s Agentforce will make companies more efficient; which will result in reduced headcount and reduced sales of software licenses per computer; and (2) AI tools will allow companies to build their own software, thus eliminating or reducing the need for Salesforce. In defending Salesforce, Benioff pointed to better-than-expected fourth-quarter fiscal 2026 results as well as the $45.8 billion revenue guidance for full fiscal 2027 that Salesforce issued in February. He said these figures show that artificial intelligence is not harming his business. In February, the company said Agentforce had closed more than 29,000 deals since its launch in September 2024 and is now an $800 million annual recurring revenue business. In its Q4 earnings call, Benioff listed Amazon, Ford, General Motors, AT&T, Moderna, and Pfizer as global brands choosing Salesforce to lead their agent transformations. In September, we spoke to a small handful of Agentforce early users who were excited about the product. But the question remains whether Agentforce sales will grow quickly enough to replace the stagnating legacy platform business. CRM mountain 2022-04-01 Salesforce since April 2022 It’s this perceived threat that hit Salesforce shares, which are down nearly 15% in the past month and more than 35% year to date, and are now trading around $170 per share. The stock saw a 4% post-earnings gain in February and briefly traded above $200 in March before falling again. Salesforce is benefiting from these prices, as its shares are well below its all-time high of around $368 in December 2024. The company launched a $25 billion debt-financed accelerated share repurchase program as part of a broader $50 billion buyback plan. This is a huge amount for a company with a market capitalization of $162 billion. “These are some low prices,” Benioff said on his February earnings call. Despite bold moves and tough talk, Salesforce is not unaware of the risks. “As with any technological disruption, we have a healthy paranoia about what could happen,” Valmik Desai, Salesforce vice president of investor relations, told CNBC. But companies that initially tried building their own tools are pushing back, Desai said. “There is a group [chief information officers] that takes a really forward-thinking approach and tries to do a lot of this work on its own. … A lot of those customers and CIOs are actually the ones coming back to the table.” Despite the opposing views, many analysts at major Wall Street firms are bullish on Salesforce as the company moves to adapt to the evolving environment. Citizens reiterated a buy-equivalent rating and $315 price target for Salesforce shares after last week’s Slack event. The AI assistant built into Slack is a one-stop service that allows users to pull data, approve workflows and complete tasks. Speaking to CNBC, Pat Walravens, head of technology equity research at Citizens, said Salesforce needs to “adapt to the world of AI” in this way, saying that while AI-powered tools make it easier for companies to build their own tools, this approach is a more viable option for smaller or newer companies, but for larger companies where data management and privileges are critical, building these systems from scratch can be risky, Walravens said. believes it will stick with suppliers Citizens is among the 74% of research shops that have a buy or equivalent buy rating on the stock, with 24% holding and only 2% selling, according to FactSet Bottom line Jim and Jeff Marks, the Club’s director of portfolio analysis, addressed the issue: On Thursday’s Morning Meeting, the situation for Salesforce shares and other enterprise software companies was tough, Jim told Jeff. “We talked,” he said. Then he asked rhetorically: “How much do you really want to lose on Salesforce?” Jeff said software stocks are definitely problematic. But for now, Salesforce is our smallest weighted position at under 1% of the portfolio. He has repeatedly said that investors’ concerns about SaaS are overblown. But Jim, a Benioff fan for years, thinks Salesforce needs to find a way to change the narrative that has taken over the market (Jim Cramer’s Charitable Trust is a long CRM. See here for a full list of stocks.) When you subscribe to the CNBC Investment Club with Cramer, you will receive a trade alert before Jim buys or sells a stock in his charitable foundation’s portfolio. If Jim has discussed a stock on CNBC TV, you will wait 72 hours after placing the trade alert before executing the trade. NO PARTICULAR RESULT OR PROFIT IS GUARANTEED DUE TO THE AVAILABILITY.
