Morgan Stanley downgrades Salesforce stock as AI pivot struggles to deliver growth inflection

Salesforce's AI pivot hasn't gained enough traction to save its stock price, Morgan Stanley says

Salesforce has embraced artificial intelligence as a means to boost its business, but investors should steer clear of the stock until its AI transformation yields more convincing results, according to Morgan Stanley. The investment bank downgraded the software name to equal-weight from overweight. It also lowered its price target on shares to $185 from $287, suggesting 6% upside from Monday's close. In premarket trading, the stock was down nearly 4% in the wake of the downgrade. "CRM is actively disrupting itself to position for the agentic era, but strong Agentforce KPIs have yet to drive an inflection in organic growth as legacy portfolio drags persist," analyst Adam Wood said Tuesday in a note to clients. "Shares likely to remain range-bound absent a notable growth inflection." The stock's risk-reward is likely balanced at roughly 19 times price to earnings, he said. Shares of Salesforce have fallen 34% year to date as investors have rotated out of software stocks, worried that AI will make their services less relevant. CRM YTD mountain Shares have fallen 34% in 2026. The stock's decline comes even as Salesforce has taken several steps to integrate AI into its business. Last year, the customer relationship management company laid off 4,000 workers, replacing some of its support engineers with its AI-powered team of customer service bots called "Agentforce." The company also acquired AI customer service platform Fin for more than $3 billion last month as part of a broader acquisition spree focused on the emerging technology. Generally, Salesforce is making the right agentic pivot towards its headless platform, Wood wrote. However, "monetization remains nascent, meaning translation to growth will take time." Morgan Stanley's call goes against consensus on Wall Street. Of the 53 analysts covering Salesforce, 40 have a strong buy or buy rating on the stock, LSEG data shows.

Salesforce brings up the rear in the Dow Jones, Morgan Stanley is no longer a buy

In a research note, the broker says Salesforce's recent results paint a 'mixed picture' for the business, pulled between the growing enthusiasm for artificial intelligence on one side and the ongoing deterioration in subscription (SaaS) revenue on the other. While it argues that the San Francisco group is currently trying to reinvent its model to best address the era of autonomous agents, the analyst says that momentum in key indicators for its AI agent Agentforce is still not enough to trigger an inflection in organic growth, which remains held back by the drag from legacy businesses. A trading range that looks limited 'Absent a meaningful acceleration in activity, the stock should continue to trade in a narrow range,' MS warns. Morgan Stanley adds that the shares appear, at around 19 times the price-to-earnings ratio (GAAP), fairly valued in the absence of a meaningful acceleration in growth, with a balanced risk-reward profile that supports a neutral view. About an hour after the open, the stock is down 1.42% at $171.33 while the Dow Jones is up about 0.5%. The shares are down more than 35% since the start of the year.