Key Takeaways:
Salesforce Inc. shares fell 1.7% Wednesday after KeyBanc Capital Markets downgraded the software company to sector weight from overweight, citing weak customer feedback on its Agentforce AI platform and a lack of evidence that adoption is accelerating.
"The checks and customer conversations have not been strong and neither has the feedback on Agentforce," KeyBanc analysts said in a note Wednesday, reducing estimates after the firm's latest CIO survey "delivered another blow" to the investment case. The analysts removed their price target, assigning no new target.
The downgrade adds to mounting pressure on Salesforce, whose stock has fallen 39% this year to about $163, making it one of the biggest casualties of fears that generative AI tools will reduce demand for enterprise software. KeyBanc said Salesforce's financial disclosures do not support the company's claim that Agentforce's annual order value is outpacing overall AOV growth. The tool, which enables enterprise customers to build and deploy autonomous AI agents for customer support, sales assistance and workflow automation, drives more than $1 billion in annual sales, Chief Executive Officer Marc Benioff said in May.
The move comes even as Salesforce secured a major government contract this week, with the U.S. Air Force's 441st Vehicle Support Chain Operations Squadron deploying Missionforce National Security to manage a fleet of more than 84,000 vehicles across 389 locations, representing a $13.5 billion fleet valuation. The company reported stronger-than-expected fiscal first-quarter results in May, with revenue of $11.13 billion and non-GAAP EPS of $3.88 topping consensus estimates of $3.12, though second-quarter guidance came in slightly below Wall Street expectations. Salesforce said it closed 98 deals worth more than $1 million in annual contract value during the quarter, with PepsiCo, Falabella and Singapore Airlines among publicly disclosed Agentforce customers.
The broader enterprise software sector has faced similar headwinds, with the BVP Nasdaq Emerging Cloud Index falling 22% this year as investors question whether AI tools from startups and hyperscalers will cannibalize traditional SaaS revenue. Salesforce's 39% decline exceeds the sector average, reflecting its specific exposure to the Agentforce growth narrative.
Guggenheim analyst John DiFucci upgraded Salesforce to buy from neutral on July 1 with a $228 price target, calling the AI bear case a "hallucination" and arguing the current price implies a 5% decline in perpetuity. The split between the two firms highlights the uncertainty around Salesforce's growth trajectory as enterprise customers reassess spending on cloud software while rapid advances from rivals including OpenAI and Anthropic reshape the competitive field.
The downgrade puts Salesforce's next catalyst in focus: the fiscal second-quarter earnings report, expected in late August. Investors will watch for Agentforce deal volume and any changes to full-year guidance. Stocktwits sentiment for CRM dipped to extremely bearish following the KeyBanc note, with message volume remaining low.
This article is for informational purposes only and does not constitute investment advice.
