Salesforce's AI Growth Highlights Contrast Between Rapid Adoption and Slowing Core Revenue

What happened

A Seeking Alpha article argues that Salesforce presents a buying opportunity as AI disruption fears are overblown, citing profitable growth and Agentforce ARR surpassing $1.4B with over 100% growth. However, the DeepValue master report reveals Salesforce's revenue growth has decelerated from 18% in FY2023 to 9% in FY2025, indicating market saturation in core CRM. The report highlights strong financials, including $12.4B free cash flow and a $63B RPO, supporting capital returns like a $50B buyback, but notes intense AI competition from Microsoft and others. Key risks include the critical need for AI monetization to drive higher deal sizes and margin sustainability, with execution uncertainty amid regulatory and pricing pressures. While Agentforce's growth is a positive signal, it must translate into sustained revenue acceleration and improved net retention to overcome the broader growth slowdown.

Implication

Salesforce's substantial free cash flow and RPO provide downside protection and support ongoing buybacks and dividends, appealing to value-oriented investors. The rapid adoption of Agentforce and Data Cloud suggests early AI success, but investors must verify if this can offset slowing core revenue growth and competitive erosion. Intense rivalry from hyperscalers and vertical SaaS vendors could compress margins and lengthen sales cycles, demanding close attention to quarterly RPO and subscription trends. Sustainability of the 19% operating margin is crucial, as any reversal from AI investments or restructuring could undermine the profitability pivot. Ultimately, the stock's attractiveness hinges on converting AI traction into durable revenue growth, making it a 'POSSIBLE BUY' with high stakes on execution.

Thesis delta

The news of Agentforce ARR exceeding $1.4B with over 100% growth aligns with the master report's focus on AI monetization as a key catalyst, providing tangible evidence of adoption. This reinforces the positive aspects of the thesis but does not shift the core 'POSSIBLE BUY' stance, as slowed revenue growth and competitive risks remain unaddressed. Investors should watch for follow-through in demand indicators and margin trends to confirm a more bullish outlook.