Salesforce Forecasts Slowdown in Quarterly Sales Growth

Salesforce's AI Revolution Stalls as Legacy Software Giants Face Existential Threat

Salesforce's lukewarm revenue guidance signals that even the most established enterprise software companies are struggling to monetize artificial intelligence fast enough to fend off nimble AI-native startups. The CRM giant's conservative outlook reflects broader investor anxiety about whether traditional per-seat software models can survive the AI transformation reshaping enterprise technology.

Modest Growth Projections Disappoint Market Expectations

Salesforce projected quarterly revenue between $10.2 billion and $10.3 billion for the period ending in October, barely meeting analyst expectations of $10.3 billion. The company's remaining performance obligations—a key metric for future bookings—will grow by "slightly more than" 10%, aligning with analyst forecasts but failing to demonstrate the acceleration investors hoped AI would deliver.

The market's reaction was swift and unforgiving. Salesforce shares dropped 5.5% in after-hours trading following the announcement, adding to a brutal 23% decline year-to-date through Wednesday's close at $256.45. This performance stands in stark contrast to the AI boom narrative that has lifted other technology stocks.

The AI Disruption Paradox Haunts Enterprise Software

Salesforce finds itself caught in a particularly challenging position within the AI revolution. While the company has invested heavily in AI capabilities, including its Einstein platform and recent data cloud initiatives, it faces a fundamental business model threat that pure-play AI companies don't encounter.

Per-Seat Pricing Under Siege

The company's traditional per-user licensing model faces existential questions as AI promises to automate tasks previously handled by human workers. If AI agents can perform the work of multiple sales representatives or customer service agents, why would companies pay for the same number of software licenses? This concern has become a persistent overhang on Salesforce's valuation and that of similar enterprise software providers.

Competition from AI-Native Startups

Unlike previous technology transitions, the AI wave has spawned entirely new categories of competitors built from the ground up with artificial intelligence at their core. These startups aren't burdened by legacy architectures or existing customer expectations, allowing them to reimagine business processes rather than simply digitizing them.

Strategic Pivots Signal Defensive Positioning

CEO Marc Benioff's announcement that Salesforce will dedicate more resources to IT service management products represents a significant strategic shift. This move puts the company in direct competition with ServiceNow, a specialist in this category that has successfully navigated the AI transition by positioning itself as an automation platform rather than just a ticketing system.

The Informatica Acquisition: Data as the New Moat

Salesforce's pending acquisition of data-focused software company Informatica, announced in May with completion expected in January 2026 or shortly thereafter, underscores the company's recognition that data infrastructure will be crucial for AI differentiation. The deal reflects a broader industry trend where companies are acquiring data capabilities to create defensible AI moats.

Financial Resilience Amid Strategic Uncertainty

Despite the challenging outlook, Salesforce demonstrated financial strength in its second-quarter results. Revenue grew 9.8% to $10.2 billion, while remaining current performance obligations increased 11% to $29.4 billion. Adjusted earnings per share of $2.91 exceeded analyst estimates of $2.78, suggesting operational efficiency improvements even as growth moderates.

The company's data cloud and AI segment achieved $1.2 billion in annual recurring revenue, providing a foundation for future growth. Additionally, Salesforce announced a $20 billion addition to its share repurchase program, bringing total authorized buybacks to $50 billion—a signal of confidence in its long-term prospects and commitment to returning capital to shareholders.

Implications for the Enterprise Software Sector

Salesforce's cautious guidance serves as a bellwether for the broader enterprise software industry. Unlike previous technology cycles where incumbents could gradually adopt new capabilities, the AI transition appears to be creating winner-take-all dynamics that favor companies with native AI architectures.

For investors, Salesforce's performance raises critical questions about valuation multiples across the software sector. If market leaders struggle to demonstrate AI-driven acceleration, the premium historically accorded to software companies may face sustained pressure. The company's experience suggests that simply adding AI features to existing products may not be sufficient to maintain competitive advantages in an era of fundamental technological disruption.