What Happened?
Shares of CRM software giant Salesforce (NYSE:CRM) jumped 5.4% in the afternoon session after Guggenheim's John DiFucci upgraded the stock from Neutral to Buy with a $228 price target implying roughly 45% upside.
DiFucci called the fatal AI bear case on software a "hallucination." While he still sees agentic AI as a genuine risk to Salesforce, he argued "the Armageddon scenario currently priced into the stock is misaligned with reality." Like his same-day ServiceNow upgrade, this was a valuation call rather than an AI cheerlead. But for Salesforce the value case rests on a concrete AI proof point the skeptics can't easily dismiss. In Q1 FY27 (reported May 27), Salesforce beat across the board: revenue rose 13% to $11.13 billion, non-GAAP EPS of $3.88 topped the $3.12 consensus by 24%, non-GAAP operating margin hit a record 34.8%, and the company raised full-year revenue guidance to $45.9–$46.2 billion.
Critically, Agentforce, its agentic-AI product launched only in September 2024, reached $1.2 billion in annual recurring revenue, up 205% year-over-year, one of the fastest enterprise-software ramps on record. Salesforce also returned $27.5 billion to shareholders (including a $25 billion accelerated buyback), supporting per-share earnings.
After the initial pop, the shares cooled down to $164.28, up 4.9% from the previous close.
Is now the time to buy Salesforce? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Salesforce’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 9 days ago when the stock dropped 1.8% on the news that a confluence of high-profile AI talent departures from Alphabet, and a regulatory overhang pulled the entire communication-services and software complex lower. Alphabet fell roughly 6%. Microsoft slipped as well.
When the two largest software-adjacent megacaps decline together, the sector indices follow mechanically given their index weight. But the deeper driver was the market's persistent fear that AI agents would erode the subscription model that underpins traditional enterprise software economics. That fear had been compounding all year. Salesforce trades around $152, down roughly 43% year-to-date and near its 52-week low. Adobe fell approximately 49% over the past year and has not traded this cheap on earnings in over a decade.
The previous week's Accenture collapse, a near-20% single-day drop after the consulting giant cut its growth outlook and explicitly cited AI compressing demand for traditional IT services acted as a fresh confirmation of the thesis. If the largest IT services firm in the world is signaling that AI is eating its billable hours, investors extend the same logic to the software vendors whose products those hours configure.
The counterargument is that the selling has become indiscriminate. Salesforce is a Rule-of-40 company retiring 10% of its shares through a $25 billion buyback, carrying the largest AI revenue line in the category, and it is acquiring usage-based billing platforms like m3ter precisely to monetize AI agent actions rather than seats. Monness upgraded the stock to Buy the previous week on valuation. The market is pricing the cannibalization as if it already happened; the income statements might be indicating otherwise. But until these companies can prove that AI revenue scales faster than it erodes the legacy subscription base, software might remain in the penalty box even on days when the rest of tech (especially chip stocks) is celebrating.
Salesforce is down 35.2% since the beginning of the year, and at $164.28 per share, it is trading 40% below its 52-week high of $273.65 from July 2025. Investors who bought $1,000 worth of Salesforce’s shares 5 years ago would now be looking at only $670.58.
ONE MORE THING: The $21 AI Application Stock Wall Street Forgot. While Wall Street obsesses over who’s building AI, one company is already using it to print money. And nobody’s paying attention.
AI chip stocks trade at ridiculous valuations. This company processes a trillion consumer signals monthly using AI and trades at a third of the price. The gap won’t last. The institutions will figure it out. You need to see this first. Read the FREE Report Before They Notice.