Salesforce’s AI Pivot: A Strategic Reassessment Amid Technical Challenges

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Wall Street has long viewed Salesforce as a prime beneficiary of the artificial intelligence boom. However, a recent shift in tone from the company's management has introduced a note of sober realism. Moving beyond pure growth euphoria, executives are now openly discussing "trust issues" with the technology and significant technical hurdles. This strategic adjustment is already having tangible consequences, most notably within the company's workforce.

Despite a share price decline of approximately 30% since the start of the year, signals from within the company and institutional investors suggest underlying confidence. Director David Blair Kirk recently utilized the market weakness to purchase nearly $500,000 worth of stock. Furthermore, institutional players including Deane Retirement Strategies and OFI Invest Asset Management have either increased existing positions or established new ones.

Concurrently, Salesforce is advancing its international footprint. On December 23, the firm confirmed a strategic partnership with Indian drone manufacturer Garuda Aerospace. The Salesforce platform is slated to manage over 90% of Garuda's Indian customer base and support its expansion into Southeast Asia and Africa.

A Reality Check on AI Reliability

The catalyst for the current market reassessment stems from a notable admission by senior leadership. The company is confronting growing reliability concerns with large language models (LLMs). Sanjna Parulekar, a Senior Vice President, observed that confidence in these models may actually be lower today than it was a year ago. She cited technical challenges such as "AI Drift" and instances where models ignore instructions with complex inputs as key reasons.

This acknowledgment has prompted a strategic recalibration. Salesforce is shifting greater emphasis toward predictable, rules-based automation, rather than relying exclusively on generative AI. This pragmatic approach, however, has not slowed internal transformation. The deployment of AI agents has already led to a substantial reduction in the support workforce, cutting it from 9,000 to about 5,000 employees—a loss of nearly 4,000 positions. Management remains committed to its financial target for "Agentforce," aiming to generate over $500 million in annual revenue.

Analyst Outlook Retains Optimism

Even with these technical obstacles and ongoing strategic corrections, the prevailing sentiment among market observers remains largely positive. The analyst consensus continues to recommend a "Buy" rating, with an average price target hovering around $324.20. This implies significant potential upside from current trading levels.

A critical factor for future performance will be whether Salesforce can successfully return to double-digit organic subscription revenue growth by the fourth fiscal quarter of 2027, as planned. The company's ability to navigate its AI transition while maintaining growth momentum is now the central narrative for investors.