"AI transformation" cannot conceal the weak subscription revenue, Morgan Stanley sharply cuts Salesforce, Inc. (CRM.US) target price to $185.

Morgan Stanley recently downgraded Salesforce, Inc. (CRM.US) from "overweight" to "neutral," with the target price significantly lowered from $287 to $185, a decrease of about 35%. The downgrade was due to the significant disconnect between the rapid progress of its AI and the continued softness in subscription revenue growth. AI Fanfare Fails to Drive Fundamental Turning Point Against the backdrop of the overall revaluation of tech stocks, Morgan Stanley analyst Adam Wood pointed out in a research report that although Salesforce, Inc. is "actively reinventing itself," its core organic growth has not shown a turnaround yet. The stock price of Salesforce, Inc. has declined by about 34% since the beginning of this year, retreating significantly from its 52-week high of $274. Wood wrote, "While Agentforce's key performance indicators are changing, the momentum of artificial intelligence has not been able to reverse the current picture of cRPO (current remaining performance obligations)/organic revenue growth due to the continued drag from traditional assets (mainly Commerce and Tableau)." For this SaaS giant led by Marc Benioff, Wood described the recent performance as a "Tale of Two Cities": on one hand, the potential of AI intelligence products continues to strengthen, while on the other hand, there is a continuous deterioration in subscription revenue growth or a lack of growth space and visible forward-looking indicators. The two cancel each other out, leaving the growth story in an awkward position. Core Contradiction: Strategic Correctness Does Not Equal Turning Point in Growth The core issue currently being most scrutinized in the market is how long the transition period for Salesforce, Inc.'s new and old businesses will last. Wood deeply analyzed the impact of this disconnect on the capital market in the report: "The mismatch between strong Agent KPIs and the lack of a turning point in organic growth indicators has led to a significant drop in stock price. Investors are focusing on one key question: when will Agentforce and the new headless profit plan offset the structural drag from underperforming areas in the portfolio (Commerce, Tableau), leading to sustained growth in subscription revenue?" Although Salesforce, Inc. is accelerating the integration of acquisitions and internal assets such as Informatica, MuleSoft, Data 360, and Slack, in an attempt to build an enterprise-level intelligent AI control platform, Wood also acknowledges its strategic shift towards headless software and Agentic (AI) direction as "strategically correct." However, the ambiguity in the monetization path makes it difficult for investors to buy into it. Profitability in its infancy: Wood added that although the direction of transformation is correct, its profitability is still in its "infancy stage," and the process of accelerating growth may be slower than some people expect. Capital expenditure squeezing leverage space: Although the company's profit margin may rise, any reinvestment in Agentforce, Data 360, and headless architecture may limit any leverage, thereby "delaying self-return." Evaluation is premature: Wood emphasized, "We believe that the integration of Informatica, MuleSoft, Data 360, and Slack provides strong evidence for Salesforce, Inc. to build an enterprise-level intelligent AI control platform, but we also realize that strategic correctness does not equal a turning point in growth, and a turning point in growth is crucial for investors to refocus on Salesforce, Inc. Therefore, the challenge facing Salesforce, Inc. is still how to translate intelligent activities into predictable subscription growth, and we believe that the current pricing trajectory clearly indicates that it is too early to evaluate the future of Salesforce, Inc." Wall Street Disagreement Intensifies: SaaS Model's Pain Points in the AI Era The downgrade of Salesforce, Inc. is not an isolated incident; it reflects the common dilemma that the SaaS software sector is facing in the AI era the traditional per-seat pricing model is being squeezed by AI intelligent agents, while the new revenue system based on performance/usage is still in its exploratory stage. Currently, there is a clear divergence on Wall Street regarding the future direction of Salesforce, Inc. In recent years, Salesforce, Inc. has taken a series of aggressive transformation measures, including restructuring internal service teams, deploying customer service AI Siasun Robot & Automation Agentforce, and making a huge investment in the AI customer service platform Fin. However, as the traditional business growth slows down and the new AI business has not yet formed a scale of recurring revenue, the market's patience for its "transition from old to new" is being tested. For Salesforce, Inc. and its CEO Benioff, how to break the awkward situation of "hot AI concepts and weak traditional subscriptions" and transform intelligent agent metrics into real recurring revenue and subscription growth will be the key to regaining Wall Street's trust.