Salesforce shares sink as organic growth fails to impress investors

Salesforce shares tumbled by 4.5% in after-hours trading, despite the software giant posting fourth-quarter results that technically beat expectations. Revenue hit $11.2 billion, a 12% rise, while adjusted earnings reached $3.81 per share.

However, beneath the surface, investors found reasons to fret. Much of the growth was bolstered by the Informatica acquisition; once stripped away, organic growth sat at a modest 9%.

This has fuelled the "bear case" that artificial intelligence might be disrupting traditional enterprise software faster than Salesforce can adapt.

A major bright spot is Agentforce, the firm’s new AI platform, which has already grown into an $800 million annual recurring revenue business.

During the earnings call, CEO Marc Benioff highlighted partnerships with global titans like Amazon and Pfizer. He noted that Agentforce is already "enhancing their operations," with Wyndham Hotels reporting reduced labour costs and increased revenue.

Yet, the market remains sceptical. Disappointing GAAP margins and a cautious outlook for the coming fiscal year haven't helped to quiet the narrative that AI is "eating" the software sector.

The company is clearly fighting back against its flagging share price, which has plummeted 27% this year. To reassure shareholders, Salesforce announced a massive new $50 billion share buyback programme.

While the stock looks "cheap" at roughly 14.5 times future earnings, analysts have lowered price targets to reflect the cooling sentiment across the industry.

For now, the focus remains on whether Salesforce can prove its long-term terminal value in an AI-driven world.