Salesforce's Data 360 Push Confronts Growth Slowdown and AI Skepticism

What happened

Salesforce's revenue growth has cooled to single digits, prompting a strategic pivot to Data 360 and AI tools aimed at securing higher-value contracts. The company reports rapid AI ARR growth exceeding 100% year-over-year, but DeepValue analysis reveals low CIO willingness to pay for CRM AI, with Microsoft capturing most enterprise AI budgets. Market sentiment treats Salesforce as a 'show-me' story, with the stock down approximately 20% over the past year due to lagging AI payback and modest growth outlooks. Despite management's emphasis on Data 360 integration, surveys indicate only 7% of CIOs use Agentforce, highlighting adoption challenges beyond initial hype. This situation underscores the persistent gap between Salesforce's AI investments and tangible growth acceleration, keeping investor confidence subdued.

Implication

Salesforce's reliance on Data 360 to counter slowing growth reinforces the DeepValue thesis of balanced risk/reward, as the premium valuation at 35x EPS leaves little room for error without clear AI monetization. The low CIO adoption rates for Agentforce and preference for Microsoft AI suggest Salesforce may struggle to capture incremental AI budgets, potentially capping cRPO growth in the 10-11% range. Near-term, investors must monitor upcoming earnings for signs that Data 360 integration is driving higher contract values and accelerating bookings beyond current levels. If AI ARR growth decelerates or margins falter, downside risks increase toward the bear case of $230, while upside requires cRPO growth above 13% and sustained margin discipline. Therefore, patience is prudent, with a focus on quarterly metrics and CIO survey updates to gauge whether Salesforce can transition from a stable franchise to an AI growth leader.

Thesis delta

The new article confirms Salesforce's growth slowdown and strategic focus on Data 360, aligning with DeepValue's existing concerns about AI monetization and market skepticism. This reinforces the 'WAIT' rating, as no fundamental shift in the investment thesis occurs; investors should still look for cRPO growth acceleration or a lower entry point before increasing exposure.