Al Root

Several software stocks, including Salesforce, have struggled as investors worry that software, which was once eating the world, will be eaten by artificial intelligence.

Salesforce's fiscal third-quarter earnings report, scheduled for Dec. 3, won't quell those concerns, says Citi analyst Tyler Radke. The setup is bleak for Marc Benioff's workplace applications company.

Salesforce stock was down 30% year to date, through Tuesday trading. They have fallen 5% over the past five years, trailing behind the S&P 500 by more than 90 percentage points.

Those declines have left Salesforce trading for about five times the sales expected over the coming 12 months. That is down from eight times a year ago, the level where other large software firms are trading now.

Slowing growth in sales has been part of the problem. While Salesforce grew 17% a year on average over the past few years, that growth is expected to be below 10% for the next few years.

The bigger issue, however, appears to be AI. Can Salesforce monetize AI, selling AI-enabled applications across its customer base, to boost sales growth and margins? Or will AI prove to be a disruptive force that weakens Salesforce's business model?

The answer probably won't come this quarter.

"Though there is ample pipeline interest in Agentforce/Data Cloud, Agentforce production remains limited, with most anecdotes pushed by go-to-market teams more than pulled by customers," wrote Radke on Tuesday evening.

Agentforce is Salesforce's AI platform for deploying AI-enabled applications that help employees improve productivity. The Data Cloud consolidates all customer data to help power AI applications.

In the second quarter, Data Cloud and AI annual recurring revenue was more than $1.2 billion, up 120% year over year, according to the company. Total revenue for Salesforce in fiscal 2026, which ends in January, is expected to be $41.2 billion, according to FactSet.

"We connected with three Salesforce partners to understand Q3 trends and also attended Dreamforce in October; we walk away with continued cautious feedback," added the analyst. "We await wider rollouts and evidence of commercialization before considering turning more constructive."

For the fiscal third-quarter results, coming next week, Radke sees earnings per share of $2.85. Wall Street is looking for $2.86. Salesforce reported EPS of $2.41 a year ago, for the third quarter of fiscal 2025.

The AI progress at Salesforce hasn't been enough for Radke. He rates the stock at Hold and cut his price target for shares to $253 from $276.

The bearish take and target cut might be weighing on shares early Wednesday. Salesforce stock was down about 1% in early trading at $231.78, while the S&P 500 and Dow Jones Industrial Average were up 0.5% and 0.3%, respectively.

Overall, Salesforce remains a popular stock on Wall Street, with 78% of analysts covering the stock rating shares Buy. The average Buy-rating ratio for software stocks in the Russell 1000 is about 67%. The average analyst price target for Salesforce stock is about $327.

Write to Al Root at allen.root@dowjones.com

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November 26, 2025 09:47 ET (14:47 GMT)

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