Stock prices of major software companies sales force(NYSE: CRM) As of this writing, the company is trading near its 52-week low and is down about 37% year-to-date. This makes the company one of the worst-performing large-cap software stocks of 2026. The most recent low was on Thursday, and much of the software sector has since fallen. oracle Reported quarterly financial results.
But Salesforce’s artificial intelligence (AI) business is growing faster than most of the businesses the company has ever sold. Annual recurring revenue (ARR) for Agentforce, the company’s platform for powering autonomous AI agents, reached $1.2 billion in the first quarter of 2027 (period ended April 30, 2026), an increase of 205% year-over-year.
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So investors focus on companies whose latest products have tripled in price or more, and price their stocks as if their best days have passed. Both of these cannot remain true forever.
Here we take a closer look at each aspect of this disconnect and what may ultimately lead to a resolution.
Image source: Getty Images.
Why do investors keep selling stocks?
The bear case begins with a paper that has its own nickname: “SaaSpocalypse.” The fear is that increasingly capable AI agents will take over tasks currently performed by humans, reducing demand for per-seat subscriptions sold by software-as-a-service (SaaS) companies. And since Salesforce is primarily billed by users, fewer human users could ultimately mean less revenue.
This week’s Oracle report added to the pressure. The database giant posted a 21% increase in accounting revenue in the fourth quarter, but full-year free cash flow was negative $23.7 billion as it increased spending on AI data centers. Oracle stock fell about 10% on Thursday, and Salesforce fell along with other sectors.
And to be fair, the skeptics do have some ammunition. Salesforce’s first-quarter fiscal revenue was $11.1 billion, up 13% from a year ago, of which $444 million came from Informatica, a data management company that Salesforce acquired last year. Excluding this contribution, the growth rate was closer to 9%. Management also warned of continued weakness in its marketing and commerce products, along with weakness in Tableau.
numbers that don’t make sense
But here’s the weird thing: Even though Salesforce’s business has slowed down a bit, AI doesn’t seem to be the problem. In fact, AI appears to be the catalyst.
Start with Agentforce. At the end of fiscal 2026 on January 31, the company had ARR of $800 million. This means the business will grow 50% in one quarter to reach $1.2 billion. Even more surprising, seven of Salesforce’s 10 largest deals in fiscal year 1 added seats, directly challenging the idea that AI will shrink the number of seats in software.
”[T]There is a pent-up demand here where people want to use Salesforce in their work flows but need a reliable infrastructure,” said Srinivas Tallapragada, Salesforce president and chief engineering and success officer, during the company’s first quarter earnings call.
In other words, management’s position is that AI is a tailwind for Salesforce, not a threat.
CEO Marc Benioff called agenttic AI “the biggest growth opportunity for our customers and Salesforce” during the company’s first-quarter earnings call. And the company put money behind its message, launching an accelerated $25 billion share buyback earlier this year. Due in part to the resulting lower number of shares, earnings per share for the fiscal first quarter increased 52% year-over-year to $2.42.
Of course, there are caveats worth keeping in mind. That said, Agentforce is still small. ARR of $1.2 billion is less than 3% of Salesforce’s full-year revenue forecast of approximately $46 billion. As impressive as a 205% growth rate is, it still doesn’t move the needle.
Ultimately, I think the next few quarters will provide some clarity as to whether AI will be a catalyst or a deterrent for the overall business. Management said it expects organic revenue growth to accelerate again in the second half of fiscal 2027. If that re-acceleration arrives and the number of seats continues to increase, there is good reason to reduce the importance of disruptive theory. However, market skepticism may be justified if organic growth remains subdued.
Meanwhile, the stock trades at a price-to-earnings ratio of around 19 times, well below historical standards. To me, this suggests that the market has largely priced in the pessimistic outcome, leaving room for the stock to move significantly higher if Salesforce meets expectations.
Of course, there’s no guarantee that management is right, and the stock could remain volatile while the debate unfolds. But with Agent Force’s rapidly growing momentum and continued expansion of seats, the burden of proof may be on the Bears. After all, if AI really is the end of Salesforce, will the company’s AI products be the fastest growing in history?
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Daniel Sparks and his clients have no positions in any stocks mentioned. The Motley Fool has positions in and recommends Oracle and Salesforce. The Motley Fool has a disclosure policy.
Salesforce’s AI business is growing more than 200%, but the stock is nearing a 52-week low. Something has to give. Originally published by The Motley Fool
