Salesforce is on an AI buying spree, but Wall Street still has its doubts

Salesforce has begun a series of acquisitions to strengthen its AI capabilities. But it failed to persuade Wall Street to change its mind and see the company as an AI winner, not a loser. The latest notch in Salesforce's M&A belt is its $3.6 billion acquisition of AI customer service platform Fin. Announced two weeks ago, Salesforce said Fin's core product is an AI agent that helps resolve complex customer queries across a variety of platforms and channels, including email, WhatsApp, Slack, live chat and others. Agent systems can plan and execute a series of tasks for users with little human intervention; They go beyond responding to a question with a written answer. Salesforce said Fin will complement the company's flagship Agentforce suite and will focus specifically on small and medium-sized businesses looking to deploy technology quickly. Fin's agent system is powered by the proprietary Apex AI model. The deal is expected to close near the end of Salesforce's fiscal year, which ends in January. Salesforce has announced or completed at least six acquisitions since December, spanning the technology spectrum. In addition to Fin, Salesforce this month announced it would acquire M3ter, a usage-based billing platform, and content management systems provider Contentful, whose customers include Kraft Heinz and Swiss shoemaker On. Terms of both deals were not disclosed, suggesting their value is smaller. The Marc Benioff-led company also closed deals this year to bolster agency marketing technology with the acquisitions of Cimulate and Qualified and agency e-commerce; The prices of these purchases were also not specified. The series of smaller transactions comes after Salesforce last fall completed one of the largest acquisitions in its history, an $8 billion deal for Informatica. Acquiring the cloud data management company was also part of Salesforce's AI push because data is a key input for AI systems. But the acquisition spree has done little to quell concerns that AI will disrupt Salesforce's armchair business model and allow customers to build their own alternative implementations in-house. Salesforce's shares fell nearly 17% in June, its second-worst monthly performance in three years; but this January was worse; The stock fell nearly 20% as AI disruption concerns began to intensify. “I really believe Marc can get through this,” Jim Cramer said earlier this month. Jim supports Salesforce's Finnish acquisition, calling it a "very good" deal to strengthen its AI portfolio. Still, he recognizes that the company has yet to overcome concerns of disruption from software-as-a-service (Saas) players. CRM 1Y Mountain Salesforce's stock performance over the past year. For a brief moment, the “SaaSpocalypse” narrative appeared to be winding down. On May 27, Salesforce reported better-than-expected quarterly results. Over the next two days, the stock caught fire along with others in the software group, rising nearly 19% to close at its highest level since February. Then sales started again. Shares fell for 14 consecutive days starting June 2, leading to a multi-year closing low of $150.12 on June 22. The stock has gained over 5% since then. But still, Salesforce's shares are down nearly 40% for the year. DA Davidson analyst Gil Luria, a prominent Salesforce insider, said the company's deal-making process is not an antidote to distressed stocks. "It's not going to help. You can't fight the narrative," Luria said in an interview. "They can argue with investors until they're blue in the face. It's not going to change investors' minds that AI is a disruption risk for software," Luria said. Others on Wall Street are more optimistic about the role M&A could play for legacy software providers like Salesforce. In a note sent to clients on June 15, analysts at Cantor Fitzgerald said acquiring Finn made strategic sense for the company. Cantor has a buy-equivalent rating on Salesforce and a $250 price target. “A broader point we want to make is that, if implemented correctly, established SaaS vendors can make their way to the winners' table in the age of AI,” Cantor analysts wrote. They said fast-moving AI domestic companies like Finnish have innovative products but “lack the necessary scale, financial resources and distribution.” This is where companies like Salesforce with large customer bases and tons of existing data come into play. Even before the Finnish deal, Salesforce was touting that it was gaining traction with AI-powered tools, particularly Agentforce. The product's annual recurring revenue (ARR) currently stands at $1.2 billion. Including Salesforce's two data management products, Informatica and Data 360, the company said the combined ARR of the three is approximately $3.4 billion. This is an increase of over 200% from a year ago. Salesforce projects revenue of approximately $46 billion in fiscal 2027. Benioff said he's pleased with the progress Agentforce has made and the progress it can provide to clients like UCLA Health and cybersecurity firm McAfee. “We now have Agentforce Coworker within our core applications, which allows our customers to work directly with Agentforce, giving them a tremendous ability to do things they've never been able to do before,” Benioff told Jim on " Mad Money " last month. But analysts like Luria have previously argued that Salesforce has neglected its core business and placed too much emphasis on artificial intelligence; He continues to agree with this view. “Instead of focusing all the emphasis on AI and trying to counter the negative AI narrative, fixing the core business should be the priority,” Luria said. Salesforce has previously faced criticism for its M&A performance. In particular, critics argued that the company overpaid for its 2021 acquisition of Slack (valued at more than $27 billion), its largest acquisition to date, and the 2019 acquisition of data visualization company Tableau for $15.7 billion. Salesforce's acquisitions in 2026 are much smaller than the high-dollar deals that existed before the AI boom. These look more like impulse buys rather than major new products. However, Luria still argued that the company paid Fin too much for his current financial performance. Salesforce defended its recent merger and acquisition activities in a statement to CNBC. A spokesperson for the company said its M&A framework is “highly selective and focused on strategic alignment, integration discipline, margin and cash flow parameters, and leveraging our AI roadmap to drive customer value.” RBC Capital Markets analyst Rishi Jaluria said he would prefer Salesforce to allocate its capital differently. Jaluria, who downgraded Salesforce to the same level last year shortly after the Informatica deal was announced, said he was concerned the company was spreading itself too thinly. Jaluria expressed concerns about how Salesforce would fold many of its acquisitions simultaneously while managing other parts of its business, saying, "I think the pace and pace of mergers and acquisitions just presents additional risk. It's not just a risk from a stock perspective and investor sentiment. But I think there's a risk with integration." he said. “I believe Salesforce really needs to use Agentforce the right way,” Jaluria added. The analyst said Agentforce is ultimately key to a stronger company and Salesforce should focus on innovating the platform in a way that enables customers to find real value, which will ultimately increase monetization. Jaluria currently has a neutral rating and a $210 price target on the stock. As a result, Salesforce's performance has undoubtedly been disappointing and the Club does not currently intend to invest any further money in the stock. "There are better places to invest than software," Jeff Marks, the club's director of portfolio analysis, said during the June Monthly Meeting. “That's why we can't buy any more Salesforce.” Marks shared the same sentiment for our other software name, Microsoft, which is down 24% this year. The stock has struggled for many of the reasons investors are worried about Salesforce. At the same time, we're not quite ready to launch our smallest position, Salesforce, at less than roughly 0.8% of the portfolio. In a recent column he wrote for club members, Jim said he wanted to give Salesforce another quarter to prove it and provide more evidence that Agentforce adoption is growing. (Jim Cramer's Charitable Trust is long CRM, MSFT. See here for a full list of stocks.) When you subscribe to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charitable foundation's portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trading alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH THE DISCLAIMERS. 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