Salesforce NYSE:CRM shares fell about 4% in premarket trading Tuesday after Morgan Stanley downgraded the enterprise software company, citing slower-than-expected progress in translating artificial intelligence initiatives into sustained revenue growth.
Morgan Stanley lowered its rating on Salesforce to Equal-Weight from Overweight and reduced its price target to $185 from $287. The firm said recent improvements in Agentforce adoption have yet to produce a meaningful acceleration in current remaining performance obligations (cRPO), a key indicator of future subscription revenue.
The brokerage said Salesforce's AI strategy appears to be moving in the right direction, supported by assets including Slack, MuleSoft, Data 360 and the pending Informatica integration. However, it believes weaker performance in legacy businesses such as Commerce and Tableau continues to weigh on overall subscription growth.
Morgan Stanley added that commercialization of Salesforce's AI offerings remains in the early stages and may take longer than expected to contribute meaningfully to financial results. While margin expansion remains possible, the firm said continued investment in AI products could delay broader earnings leverage, leaving investors focused on evidence of stronger organic revenue growth.