Morgan Stanley comments on Salesforce, Inc. (CRM.US) Investor Day: The AI narrative is stronger, but evidence of accelerating growth is still lacking; maintains "Equal Weight" rating.

Morgan Stanley noted in a research report that after Salesforce, Inc. (CRM.US) held its Dreamforce Investor Day, it maintained an "Equal Weight" rating on the stock with a price target of $235. The firm said Salesforce, Inc. did not update its financial guidance at the event, with both the fiscal 2027 outlook and the long-term framework of achieving the "Rule of 50" by fiscal 2030 remaining unchanged. Management's tone on AI accelerating enterprise-wide diffusion was stronger, but partner surveys indicate that scaled deployment of Agentforce remains at an early stage. The debate over whether Salesforce, Inc. can achieve organic revenue acceleration in the second half of fiscal 2027, and whether the "SaaSpocalypse" has given way to "SaaSceleartion," has not dissipated because of this Investor Day. It is understood that Dreamforce's "A Day" has historically not been an occasion for major financial updates, and the market had widely expected that Salesforce, Inc. would not adjust guidance. What was truly worth watching was how management described the AI monetization path and whether partners provided sufficiently strong cross-validation. Morgan Stanley analysts Adam Wood, Elizabeth Porter, and others noted that Salesforce, Inc. believes AI will penetrate enterprise operations more substantially and effectively, and that the company can monetize through advanced edition upgrades, consumption-based billing, and broader platform adoption, thereby extending the recent momentum in net new average order value (AOV) and supporting organic revenue acceleration in the second half of fiscal 2027 and beyond. The problem, however, is that the lack of net new financial details, combined with high-single-digit growth/outlook figures recurring in partner meetings, keeps this narrative at a stage of "clear direction, insufficient evidence." Enterprise "harness" becomes the core of AI monetization Morgan Stanley said management's description of the AI opportunity was more confident than in the previous quarter. CEO Marc Benioff described the current moment as the starting point of an AI-driven enterprise transformation, and Salesforce, Inc. wants to be a key beneficiary. Its logic is not to provide the strongest model itself, but to provide what is called an "enterprise harness" models provide intelligence, but applying intelligence to specific business operations requires trusted context, business logic, and governed execution. In management's words, a model may understand the world, but it does not understand your business. In this architecture, Informatica/Data 360 is responsible for preparing and contextualizing enterprise data, Tableau provides business semantics, and Guardian/MuleSoft Agent Fabric handles security, governance, and cost control. Koa, as a CRM-based reasoning model, supplements domain intelligence for multi-step sales and service tasks. Agentforce, through new frontier model integrations, Slack Force, and Agentforce Coworker, brings these capabilities into customer workflows. The Max edition at $550 per user per month bundles Slack and Slackbot, intended to drive the next upgrade cycle. Morgan Stanley mentioned that over the past eight quarters, Salesforce, Inc. accumulated about $1 billion in AOV through advanced edition upgrades. Upgrading customers increased spending by 60% to 80%, and after customers rebalanced product spending at renewal, total account annual recurring revenue (ARR) was about 1.4 times the original. Management believes this flexibility both supports current net account expansion and helps reduce future churn risk. Broader relationship monetization is achieved through ALAs and Salesforce Commit, with ALAs already accounting for seven of the top ten deals in the second fiscal quarter. Company account data also provides some support: AI appears in 80% of top ARR growth stories, and the top 100 customers by agentic work units reached about 2x ARR within 18 months after Agentforce's launch. Partners: demand is improving, but not enough to move overall growth Alongside the event, Morgan Stanley hosted two partner meetings. The feedback was not pessimistic, but it was hardly optimistic either. Partners saw more Agentforce deployments moving out of the experimental stage, though only about high-single-digit customers truly achieved scale. Early scaled use cases were concentrated in customer service, where accuracy and labor savings were somewhat persuasive; flexible credits, outcome-based pricing, and attach sales of Data Cloud and MuleSoft also provided incremental monetization room. Competitive pressure is equally real. Private AI-native vendors such as Sierra and Decagon remain credible competitors, often converting pilots faster than Salesforce, Inc. through more flexible pricing, aggressive discounts, and specialized features. One partner even mentioned that in head-to-head evaluations, Salesforce, Inc. won only a minority of projects. Salesforce, Inc.'s advantages remain in CRM data access, governance, integration, and enterprise-grade workflows, but the risk is that private vendors may gradually occupy the engagement layer while Salesforce, Inc. is pushed into a lower-value back-end role, especially if customers reduce seat licenses without making up the revenue through consumption. Morgan Stanley said initial market interest in headless architectures was viewed as a positive signal, because easier access to Salesforce, Inc. data could boost productivity and accelerate use case creation. But partners doubt whether this monetization pull is durable: as context engineering improves, models may become less dependent on Salesforce, Inc.'s closed metadata advantage, thereby weakening its ability to charge a premium for access. Overall, partner practices are still growing only at high-single-digit rates, with limited visibility for breaking above 10%. The main constraints are not Salesforce, Inc.'s lack of AI innovation, nor a large-scale customer migration to competing platforms, but rather the maturity of the CRM market, already high penetration, longer decision cycles, and uneven customer data readiness. Agentforce currently looks more like an incremental positive than a catalyst across entire practices. In summary, Morgan Stanley maintained its "Equal Weight" rating on Salesforce, Inc. with a price target of $235. The price target is based on 12 times fiscal 2029 free cash flow per share of about $22, discounted at about 10%, plus $13 per share in net cash added back. The firm said that in a bull case, if Agentforce and Data Cloud are adopted rapidly and renewal rates improve, revenue CAGR could reach about 15%, operating margin could rise to about 39% by FY29, and the price target could reach $350; in the base case, revenue CAGR is about 10%, operating margin is about 36%, and the price target is $235; while the bear case assumes intensified AI-native competition and a legacy portfolio dragging on growth, with revenue slowing to mid-single-digit growth, corresponding to a next-twelve-month valuation of $90.