{"id":619,"date":"2026-05-27T16:38:51","date_gmt":"2026-05-27T16:38:51","guid":{"rendered":"https:\/\/nextcitydigest.com\/?p=619"},"modified":"2026-05-27T16:38:51","modified_gmt":"2026-05-27T16:38:51","slug":"salesforce-earnings-can-put-ai-fears-to-bed-give-stock-a-lift","status":"publish","type":"post","link":"https:\/\/nextcitydigest.com\/?p=619","title":{"rendered":"Salesforce earnings can put AI fears to bed, give stock a lift"},"content":{"rendered":"
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By Ryan Vlastelica, Bloomberg<\/strong><\/p>\n

While software stocks rebound from the artificial intelligence-driven wipeout earlier this year, Salesforce Inc. hasn\u2019t really benefited. But its earnings after the close Wednesday could pull the company\u2019s shares out of their malaise.<\/p>\n

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Salesforce is up 10% since hitting a three-year low on April 10, but the stock still has lost 31% this year. It\u2019s badly underperforming the iShares Expanded Tech-Software Sector exchange-traded fund, which has jumped 25% since hitting its own recent low on April 10 and is down 11% this year. And both are being trounced by the technology-heavy Nasdaq 100 Index\u2019s 19% rise in 2026, largely powered by high-flying chipmakers.<\/p>\n

Salesforce shares rose roughly 1% Wednesday morning.<\/p>\n

\u201cIt has gone through a very painful period, but there\u2019s a stickiness and staple-like nature to the business that people have underestimated, even though revenue is still growing at a decent pace,\u201d said Brian Kersmanc, portfolio manager at GQG Partners, which owns Salesforce shares. \u201cNow that we\u2019ve had this big washout, I think we\u2019re going to start seeing the merits shine through.\u201d<\/p>\n

Software stocks are getting some life as encouraging corporate earnings reports indicate that AI may not end up devastating growth like investors had assumed, and in some cases it could be a potential tailwind. That, coupled with valuations that fell to rock-bottom levels, has Wall Street thinking that the industrywide weakness from earlier this year may have gone too far.<\/p>\n

Salesforce, however, has missed much of the bounce back as it continues to face questions about its prospects. Wall Street\u2019s primary concern is competition from Anthropic and OpenAI weakening demand and pricing power for its customer relationship management software, which for years drove robust growth at high margins.<\/p>\n

For example, Bank of America last week reinstated coverage of the company with an underperform rating due to \u201cstructurally lower growth\u201d and greater competitive risks from AI.<\/p>\n

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\u201cSalesforce remains a deeply entrenched platform, yet we expect a structural reset driven by AI transition that raises three core concerns: muted net new customer additions, limited up-sell potential, and an underwhelming AI monetization pathway,\u201d BofA analyst Tal Liani wrote in the note. \u201cThe company is transforming from a historically high growth platform to a mature cash generator.\u201d<\/p>\n

The anticipated AI disruption is more apparent in sentiment surrounding Salesforce than in its actual fundamentals, at least so far. The company is expected to post revenue growth of 11% in fiscal 2027, which ends in January, up from 9.6% in fiscal 2026, according to data compiled by Bloomberg. Meanwhile, the stock is about the cheapest it has ever been, trading for just 13 times estimated earnings, below its 10-year average of 45. Salesforce\u2019s multiple hit an all-time low two weeks ago and has been less than 30 for over a year.<\/p>\n

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\u201cIt is incredibly arduous for businesses to even switch CRM providers, given all the legal and compliance and operational issues, so I don\u2019t think there\u2019s much to the idea that Salesforce can be replaced through vibe-coding,\u201d said Kersmanc, referring to users writing code with AI, which is seen as a significant risk for software makers. \u201cAs people become more comfortable it isn\u2019t being disrupted, I think it\u2019ll re-rate higher. Double-digit growth at a low-teens multiple looks really attractive.\u201d<\/p>\n

He isn\u2019t alone in that view. Of the 62 analysts tracked by Bloomberg that cover Salesforce, 47 have buy ratings and their average price target of $253 indicates the stock will rise 37% in the coming 12 months. That\u2019s one of the strongest implied returns in the S&P 500 tech sector, according to data compiled by Bloomberg.<\/p>\n

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Software companies have had a strong earnings season, with roughly 87% topping expectations for earnings and revenue, higher beat rates than for the S&P 500 overall, according to data compiled by Bloomberg. Only 71% of software companies topped revenue expectations in the prior earnings season.<\/p>\n

For Salesforce, the question remains whether its products are about to be displaced by AI. Stephen Bersey, head of technology research at HSBC, doesn\u2019t agree with the pessimism, largely because much of the value of what the company sells comes from proprietary data and how deeply the programs are embedded across its customers\u2019 enterprises. Oracle Corp., Microsoft Corp. and ServiceNow Inc. are also in this position, he said, unlike companies that sell more niche applications like developing apps or photo editing, which are more at risk of AI disruption.<\/p>\n

\u201cAI represents one of the most significant monetization opportunities for software that I\u2019ve seen in several decades,\u201d he said. \u201cIt is ironic to me that as we sit in front of a golden age of software, powered by AI, that the market is the most pessimistic about the sector as it has ever been.\u201d<\/p>\n

Tech Chart of the Day<\/p>\n

The surge in memory-chip stocks is intensifying, sending the market capitalizations of SK Hynix Inc. and Micron Technology Inc. above $1 trillion for the first time, as investors bet the AI boom will lead to a sustained revaluation of the industry.<\/p>\n

Top Tech Stories<\/p>\n