We turn our focus to Salesforce, whose stock is experiencing a significant drop, raising concerns among investors about the future of the software sector.

Salesforce shares are down 15.7% in premarket trading, following the company’s announcement of a reduced subscription revenue outlook and reports of customers tightening their spending. If this trend continues into the regular trading session, it could mark Salesforce’s largest single-day percentage drop since March 16, 2020.

Analysts have weighed in on the situation, expressing varying levels of concern. Bernstein analyst Mark Moerdler maintained an underperform rating on Salesforce, citing skepticism about the company’s core initiatives and its ability to capitalize on AI opportunities. Moerdler noted that the business’s weaknesses are becoming more apparent, suggesting that investors need to rethink Salesforce’s growth prospects.

Market Concerns Mount as Salesforce Faces Unprecedented Stock Pressure

Salesforce has kept its overall revenue outlook for the fiscal year, aiming for 8% to 9% growth. However, the company revised its subscription and support revenue growth to just below 10%, down from the previous estimate of around 10%.

UBS analyst Karl Keirstead highlighted that the spending environment appears to have weakened, affecting the broader software sector, not just Salesforce. He noted the possibility of further adjustments to revenue projections if current trends persist.

Similarly, Guggenheim’s John DiFucci expressed concerns about the subscription revenue guidance, indicating that it implies a significant uptick in new annual contract value growth in the latter half of fiscal 2025. DiFucci maintained a neutral rating on the stock, suggesting that Salesforce may need to rely on Professional Services revenue to offset any shortfalls.

On a more optimistic note, Evercore ISI’s Kirk Materne believes Salesforce has maintained its fiscal year revenue guidance for a reason, citing pipeline visibility and favorable pricing trends in the second half of the year. Despite acknowledging the softness in the latest quarter, Materne views Salesforce as a margin expansion and free-cash-flow growth story, giving it an outperform rating and a $300 target price.

The varying perspectives from analysts underscore the uncertainty surrounding Salesforce’s future performance, making it a critical stock to watch in the coming months.