Salesforce (CRM) was in focus on Tuesday as recent channel checks performed by UBS showed an uptick in Agentforce usage, but core growth has remained “muted.”
“Bottom line, the Agentforce feedback up-ticked and customers are uninterested in replacing Salesforce with an AI-built alternative but we did NOT pick up evidence to support a view that Salesforce’s backlog or revenue growth rates are bending higher,” UBS analyst Karl Keirstead wrote in a note to clients.
Keirstead, who has a Neutral rating on Salesforce, lowered his price target on the stock to $200 from $260.
Delving deeper into Agentforce, Keirstead said that two of the seven customers he spoke to were confident enough in its capabilities to “materially” cut customer support headcount. “That is bullish, even if other checks were more balanced,” Keirstead added.
However, on the company’s core business, it’s a different story, despite the company indicating bookings are rising again. “Over the medium-term, none of the customers we spoke to were interested in harnessing AI models to replace their core Salesforce system of record, it’s not happening anytime soon, although ancillary modules (and Tableau) could be at risk,” Keirstead added. “Comments such as ‘Salesforce’s core platform is not built for AI’ imply to us that the [medium-term] opportunity/risk is a function of Salesforce’s ability to AI-enable its core.”
He continued: “We’re well aware that Salesforce is saying that bookings momentum (especially in the SMB market) is recovering, but at least in our checks, we did not pick up evidence of this. Customers appear to be focused on containing spend on application software and prioritizing AI, data, cyber-security and cloud infra projects.”