Salesforce AI Growth Solid but Monetization Risks Linger Amid Contrarian Call

What happened

A Seeking Alpha article argues Salesforce's recent selloff is overdone, citing solid Agentic AI business and double-digit bookings momentum as reasons for a contrarian buy opportunity. The article notes Agentforce ARR surged 330% year-over-year to $540 million, though it remains a small 3.6% of subscription revenue, indicating slower AI monetization than hype suggests. DeepValue's report acknowledges rapid AI ARR growth but highlights critical risks, including CIO surveys showing limited willingness to pay premiums for CRM AI and only 7% Agentforce usage. At a current price near $248, Salesforce trades close to DeepValue's attractive entry point of $230 but still above it, with the base case valuation of $275 implying modest upside from current levels. Overall, while the AI narrative is progressing, the core investment thesis remains unchanged: patience is warranted until clearer evidence emerges that AI can sustainably boost company-level growth above 10%.

Implication

The Seeking Alpha buy call overlooks DeepValue's identified execution risks, such as Informatica integration costs and competitive pressure from Microsoft in AI budgets. Salesforce's high valuation multiple of 33x trailing EPS leaves little margin for error if AI monetization stalls or margins compress. For contrarian investors, any dip below $230 could offer a more attractive entry, aligning with DeepValue's wait rating. Monitoring upcoming FY27 guidance and AI ARR trends will be crucial to assess whether the growth re-acceleration materializes. In the meantime, maintaining a wait-and-see approach balances the potential upside from AI with the downside risks from execution and market skepticism.

Thesis delta

The Seeking Alpha article does not materially shift the investment thesis; it reinforces the ongoing debate between AI optimism and execution caution. DeepValue's wait rating remains appropriate, as the news confirms AI ARR growth but also the small revenue mix, underscoring the need for broader adoption to justify current valuations.