Salesforce is on an AI buying spree, but Wall Street still has its doubts

CNBC Finance

8 min read

Salesforce has embarked on an acquisition spree to beef up its artificial intelligence capabilities. But it hasn't convinced Wall Street to change its mind and start viewing the company as an AI winner, not a loser. The latest notch on Salesforce's M & A belt is a $3.6 billion acquisition of AI customer service platform Fin. Announced two weeks ago, Salesforce said Fin's lead product is an AI agent that helps resolve complex customer queries across various platforms and channels including email, WhatsApp, Slack, live chat, and others. Agentic systems are capable of planning and executing a series of tasks for users with little human intervention; they go beyond responding to a prompt with a written response. Salesforce said Fin will complement the company's flagship Agentforce suite, with a particular focus on small-to-medium sizes businesses looking to quickly deploy the technology. Fin's agentic system is powered by its proprietary Apex AI model. The deal is expected to close toward the end of Salesforce's fiscal year, which ends in January. Salesforce has announced or completed at least six acquisitions since December, spanning across the technology spectrum. In addition to Fin, this month Salesforce said it will buy M3ter, a usage-based billing platform, and Contentful, a provider of content management systems whose customers include Kraft Heinz and Swiss shoemaker On . Terms of both deals were not disclosed, suggesting their value is on the smaller side. The Marc Benioff-led company has also completed deals this year to bolster its tech for agentic marketing with the purchase of Qualified, and agentic e-commerce with Cimulate; prices for those buys weren't provided, either. The string of smaller transactions follows Salesforce last fall completing one of its larger acquisitions in its history, an $8 billion deal for Informatica. Buying the cloud data management company was also part of Salesforce's artificial intelligence push because data is a key input for AI systems. The buying spree, however, has done little to cast away concerns that artificial intelligence is going to disrupt Salesforce's seat-based business model and allow customers to make their own alternative applications in-house.Â Shares of Salesforce are down about 17% in June, on pace for its second worst monthly performance in three years; only this January was worse, when the stock fell almost 20%, as AI disruption concerns started to intensify. "I genuinely believe that Marc can transcend this," Jim Cramer said earlier this month. Jim supports Salesforce's Fin acquisition, calling it a "very good" deal to strengthen its AI portfolio. Still, he realizes the company has yet to overcome the disruption concerns for software-as-a service (Saas) players. CRM 1Y mountain Salesforce's stock performance over the past year. For a fleeting moment, it looked like the "SaaSpocalypse" narrative was subsiding. On May 27, Salesforce reported better-than-expected quarterly results . Over the next two days, the stock â along with others in the beaten-down software group â caught fire, surging almost 19% to close at its highest levels since February. Then the selling resumed. Shares declined for 14 consecutive days beginning June 2, which led to a multiyear closing low of $150.12 on June 22. The stock has climbed over 5% since then. But still, for the year, Salesforce's stock is down about 40%. D.A. Davidson analyst Gil Luria, a prominent Salesforce bear, said the company's dealmaking isn't an antidote for the ailing stock. "This isn't going to help. You can't fight narrative," Luria said in an interview. "They can argue with investors until they're blue in the face. It's not going to change investors' minds that AI is a disruption risk for software," Luria said. Others on Wall Street are more optimistic on the role that M & A can play for legacy software providers like Salesforce. In a note to clients June 15, analysts at Cantor Fitzgerald said buying Fin made strategic sense for the company. Cantor has a buy-equivalent rating and $250 price target on Salesforce. "A broader point we want to make is that if executed properly, incumbent SaaS vendors could acquire their way to the winner's table in the AI-era," Cantor analysts wrote. They said fast-moving AI native companies such as Fin have innovative products, but "lack the necessary scale, financial resources, and distribution." That's where companies like Salesforce, which have large customer bases and tons of existing data, come into play. Even before the Fin deal, Salesforce has argued it is gaining traction with AI-powered tools, most notably Agentforce. The product's annual recurring revenue (ARR) is now at $1.2 billion. When including Salesforce's two data management products â Informatica and Data 360 â the company said the three have combined ARR of nearly $3.4 billion. That's up over 200% from a year earlier. Salesforce is projecting roughly $46 billion in revenue in fiscal 2027. Benioff has said he is pleased with the progress of Agentforce and what it can provide to customers like UCLA Health and cybersecurity firm McAfee. "Inside our core applications now, we have Agentforce Coworker that lets our customers work with Agentforce directly, giving them tremendous capability to do things that they've just never been able to do before," Benioff told Jim on " Mad Money " last month. But analysts like Luria have previously argued that Salesforce was neglecting its core business and throwing too much weight behind AI, a stance he continues to agree with.Â "Fixing the actual core business should be the priority, instead of putting all the emphasis on the pivot to AI and trying to counter the negative AI narrative," Luria said. Salesforce has previously faced criticism for its M & A track record. In particular, critics have argued the company overpaid for the 2021 acquisition of Slack â valued at more than $27 billion , its largest takeover to date â and the 2019 purchase of data visualization company Tableau for $15.7 billion. Salesforce's acquisitions in 2026 are much smaller than those high-dollar deals that predate the AI boom. These are more like bolt-on acquisitions, rather than major new products. However, Luria still argued the company paid too much for Fin relative to its current financial performance. In a statement to CNBC, Salesforce defended its recent M & A activity. A spokesperson for the company said the framework for its mergers and acquisitions are "highly selective and focused on strategic fit, integration discipline, margin and cash flow parameters, and advancing our agentic AI roadmap to drive customer value." RBC Capital Markets analyst Rishi Jaluria said he'd prefer Salesforce to allocate its capital differently. Jaluria, who downgraded Salesforce last year to a hold-equivalent rating shortly after the Informatica deal was announced, said he worries the company is spreading itself too thin. "The rate and pace of M & A is something that I think just presents additional risk. It's not only a risk from a stock perspective, and an investor sentiment. But I think there's a risk with integration," Jaluria said, expressing concern about how Salesforce will fold in so many of its acquisitions at once while managing other parts of its business. "There's just additional integration risk at a time where Salesforce, I believe, really needs to get Agentforce right," Jaluria added. The analyst said that Agentforce is ultimately the key for a stronger company, and that Salesforce should focus on innovating the platform so that customers find real value, which will ultimately drive monetization. Jaluria currently has a neutral rating and $210 price target on the stock. Bottom line Salesforce's performance has no doubt been dispiriting, and the Club isn't considering putting any more money to work in the stock at this time. "There are better places to invest" than software, said Jeff Marks, the Club's director of portfolio analysis, during the June Monthly Meeting . "It's why we haven't been buying more of Salesforce." Marks shared the same sentiment on our other software name, Microsoft , which is down 24% this year. The stock has struggled for many of the same reasons that investors are worried about Salesforce. At the same time, we aren't quite ready to boot Salesforce, which is our smallest position at less roughly 0.8% of the portfolio. In a recent column for Club members, Jim said he'd like to give Salesforce another quarter to prove that itself, and offer more evidence that Agentforce adoption is growing. (Jim Cramer's Charitable Trust is long CRM, MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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