Is Salesforce's AI Boom a Bust? Mixed Reviews on Monetization Despite Bullish Analyst Predictions

RBC Capital analyst Rishi Jaluria reiterated Salesforce Inc CRM with an Outperform and a $240 price target.

The analyst went to Dreamforce in San Francisco in person, listening to several keynotes and speaking to over a dozen partners.

Also Read: Salesforce Embarks on Hiring Spree, Adding 3,300 New Faces to Drive Growth

The demand trends seem unchanged, and the AI story continues to take shape, with a near-term focus on building a more integrated platform and laying the data foundation needed to derive value from AI, announced freemium offerings for Data Cloud and Tableau and introduced plans for a Pharma CRM, to no surprise.

The analyst projects a Q3 revenue of $8.71 billion vs. consensus $8.12 billion and EPS of $2.05 vs. consensus $1.92.

Needham analyst Scott Berg reiterated Salesforce with a Buy and a $250 price target.

The analyst rerated after attending the company's Dreamforce conference this week, where the overall tone was more bullish than his expectations. Without the typical well-attended analyst day, he focused on the plethora of new and existing Gen AI-enabled functionality that was the key topic highlight of the conference. 

The major press release was on the new Einstein 1 platform, but CRM had numerous minor AI releases across its different Clouds. Berg came away with a generally positive view of the functionality. 

Still, his primary concern is how, or if, the company can monetize this functionality, as we heard mixed feedback regarding selling an SKU in the Service Cloud. 

At a minimum, the added functionality will keep CRM more than competitive. New product announcements squarely focused on Gen AI use. 

Before the formal kick-off of Dreamforce, CRM issued press releases highlighting its new AI offerings with Einstein 1. AI demos display progress to date and future releases, with mixed reviews on monetization abilities. 

While walking the floor, he gathered insights regarding current and future AI functionality from some of Salesforce's main clouds.

The analyst projects a Q3 revenue of $8.71 billion and EPS of $2.06.

Price Action: CRM shares traded lower by 2.00% at $214.40 on the last check Friday.