After two years of turbulence in the software sector, Salesforce (CRM-US) is finally showing signs of stabilization—and possibly a meaningful rebound. With investor anxiety around artificial intelligence beginning to cool and management doubling down on profitability, analysts argue that the stock may be positioned for a recovery heading into 2026.
The shift comes after a period of dramatic swings for software companies. The post‑pandemic digital boom, followed by aggressive rate hikes, sent valuations soaring and then crashing. The arrival of generative AI reshaped expectations again, creating a new divide between perceived winners and laggards. Salesforce, once a Wall Street favorite, found itself on the wrong side of that debate.
A Sector That Went From Darling to Disputed
Between 2009 and 2019, software stocks in the S&P 500 delivered nearly 20% annualized returns. From late 2019 to the end of 2021, those returns more than doubled as cloud adoption surged. But the momentum didn’t last. Software stocks plunged 30% in 2022, and while the sector has since rebounded, performance has been uneven.
Few companies illustrate that divergence more clearly than Palantir, which has posted an eye‑popping 200% annualized return over the past three years. Salesforce, by contrast, has seen its stock fall roughly 20% annually over the same period, as investors questioned whether the company was falling behind in the AI race.
A year ago, Salesforce traded at $369 per share, valued at nine times its projected 2025 revenue. Today, the stock is down nearly 30% from its peak, and its valuation has compressed to less than six times estimated 2026 revenue.
Agentforce: The Center of the Debate
The market’s biggest question is whether Agentforce, Salesforce’s AI agent platform, can deliver meaningful growth. The platform promises automated sales, service, and marketing workflows—an area where enterprise demand is rising but execution remains challenging.
BTIG analyst Allan Verkhovski notes that investors will likely debate Salesforce’s AI strategy "for years," but current valuations already reflect pessimism. In his view, the stock price implies that the core customer‑relationship‑management (CRM) business is in decline.
Barron’s, however, argues that this view may be too harsh. Agentforce’s annual recurring revenue surged 330% year‑over‑year to $540 million, with more than half of new orders coming from existing customers. That’s a sign of early traction, even if AI revenue remains a small slice of Salesforce’s projected $46 billion in 2026 revenue.
Revenue Growth Expected to Reaccelerate
After slowing to roughly 9% growth in 2024, Salesforce is expected to return to 11% revenue growth in 2026, outpacing the company’s 2025 forecast. The improvement is tied to rising order visibility, measured through remaining performance obligations—signed revenue not yet recognized.
Management expects those obligations to grow 9% year‑over‑year this quarter, a sign that demand is stabilizing. CFO Robin Washington said this momentum should support "accelerated revenue growth" into next year.
Valuation: Is Salesforce Finally Reasonable Again?
Oakmark Funds portfolio manager Bill Nygren argues that valuing software companies at 8–10 times revenue is "economically sound." By that measure, Salesforce—now trading below six times forward revenue—may be undervalued.
The broader software sector trades at roughly nine times next‑twelve‑month revenue, according to S&P 500 data. Salesforce’s discount reflects its failure to meet the industry’s "Rule of 40" for most of 2025. The rule states that a software company’s revenue growth plus profit margin should total at least 40%.
Salesforce fell short last year, and investors punished the stock accordingly. But the company has made progress. Profit margins have improved by more than 15 percentage points since 2021, reaching 33% this year. If revenue growth accelerates as expected, Salesforce could regain compliance with the Rule of 40—historically a catalyst for multiple expansion.
AI Skepticism May Be Peaking
One of the biggest drags on Salesforce’s stock has been skepticism about AI monetization. Daniel Newman, CEO of Futurum Research, argues that investors spent much of 2025 "over‑focusing" on how AI would translate into revenue.
He believes that narrative will fade as more enterprises adopt AI agents and move from pilot programs to full deployment. Stifel analyst Brad Reback agrees, noting that customers are beginning to shift from proof‑of‑concept testing to real operational use.
If Agentforce adoption accelerates, analysts estimate Salesforce’s valuation could return to eight times 2026 revenue, implying a stock price near $390—roughly 50% above recent levels.
Risks: Expectations, Competition, and AI Disruption
Despite the improving outlook, risks remain. The most immediate is that Salesforce could fall short of current expectations. Even if growth stabilizes, it may not be enough to satisfy a market that has become increasingly selective.
Longer term, external AI platforms could challenge Salesforce’s own agent ecosystem. If third‑party AI tools become the preferred interface for enterprise workflows, Salesforce may need to adapt quickly to avoid being displaced.
Still, analysts note that these risks diminish as Salesforce improves product efficiency and integrates AI more deeply across its cloud offerings.
A Potentially Stable Pick in a Volatile AI Market
Barron’s concludes that Salesforce doesn’t need a dramatic turnaround to deliver meaningful stock gains—just solid execution. With profitability improving, revenue growth stabilizing, and AI concerns easing, the company may be better positioned than its recent performance suggests.
In a market where AI volatility is likely to continue into 2026, Salesforce stands out as a large‑cap software name with improving fundamentals and a valuation that no longer looks stretched.
If Agentforce continues to gain traction and management maintains its focus on margins, Salesforce could shift from an AI laggard to a steady compounder—one that investors may eventually view as having been undervalued during the sector’s most turbulent phase.