Salesforce stock drops as AI monetization concerns hit forecast, rival Snowflake benefits

The cloud computing industry has seen massive investments in artificial intelligence capabilities over the past two years, with major players racing to monetize their AI offerings. Salesforce, a leading enterprise cloud company, is facing investor scrutiny over its AI strategy after releasing disappointing revenue forecasts.

Market reaction: Salesforce shares dropped over 4% following the company’s weak annual revenue and profit forecast, potentially erasing $12 billion in market value.

• The company’s stock decline reflects growing investor concern about the timeline for realizing returns on significant AI investments
• Salesforce’s forward price-to-earnings ratio of 27.07 remains significantly lower than competitors like Snowflake (162.52) and ServiceNow (55.23)

Strategic pivot challenges: CEO Marc Benioff‘s efforts to transition Salesforce beyond traditional cloud computing toward machine learning and generative AI face headwinds as core business growth slows.

• The company’s Agentforce AI builder platform is not expected to generate meaningful revenue until fiscal 2027
• Traditional business clouds and subscription revenue are experiencing deceleration due to reduced enterprise spending
• Data cloud remains a bright spot, with AI annual recurring revenue growing 120% last year

Expert analysis: Industry observers point to concerning trends in Salesforce’s strategic focus and growth trajectory.

• Gil Luria of D.A. Davidson notes that the emphasis on Agentforce may be coming at the expense of core business performance
• AJ Bell’s Danni Hewson highlights that while the outlook could improve, investor patience is wearing thin given the substantial AI investments
• The company’s situation mirrors broader industry pressure on tech giants like Microsoft and Meta to demonstrate returns on AI investments

Looking ahead: Technology transition timing: While Salesforce’s data cloud success provides a foundation for future growth, the extended timeline for AI monetization poses near-term challenges for investor confidence and market positioning. The company’s ability to accelerate AI adoption while maintaining core business strength will be crucial for reversing current market sentiment.