Salesforce Stock Slides Further as AI Pummels ‘Dying’ SaaS Market

Salesforce stock dropped 14% over a five-day period but rallied somewhat on Wednesday as the company battles an ongoing ‘Death of SaaS’ narrative affecting its core product offerings. Tech companies were a focus for Wall Street this week, particularly those that could see steeper competition and lower margins because of AI. 

A selloff in global providers of data analytics, professional services, and software deepened after Anthropic launched plug-ins for the Claude Cowork agent on Friday – automating legal work like reviewing contracts, non-disclosure agreement triage, and compliance workflows – increasing concerns about AI-fuelled disruption. 

‘Your Business Models Are Under Serious Threat’

On Wednesday, global share prices dipped amid concerns about the negative shock from artificial intelligence to parts of the tech sector – with gold heading for its biggest two-day gain in more than 17 years and oil prices briefly spiking, Reuters reported. 

CRM stock hit a low level reminiscent of the bleak days of 2023. The preceding year had been one of great turmoil for Salesforce, with activist investors pushing for better margins and operational efficiency, forcing the company to rethink many of its strategies for growth. More recently, activist hedge fund Starboard Value bought 50% more CRM stock amid a sharp dip in value last year, prompting fears that the ecosystem would be ‘reliving 2022’. 

Art Hogan, chief market strategist at B. Riley Wealth, said: “We’re looking at a lot of software names that are seen as companies that may well be disrupted when we start to see the advancement of artificial intelligence. We’re seeing a lot of software companies across the spectrum get hit.” 

Senior portfolio manager at Allspring Global Investments, John Campbell, said: “We’ve got an expensive market and expectations are really high. Many areas, especially around AI, are priced for perfection. That’s just got us in a skittish environment.”

European stocks dropped from record highs, with shares in the London Stock Exchange Group (LSEG), British multinational information and analytics company RELX, and global provider of professional information Wolters Kluwer all dropping. 

Speaking of the software companies, IG chief markets strategist Chris Beauchamp said: “Anthropic is now, really obviously parking its tanks on their lawn. The market is clearly telling them: ‘Look, your business models are under serious threat here, even if it’s not doomed, it’s not an apocalypse. It is certainly a major challenge for you to come up with solutions that involve partnerships with OpenAI or Anthropic or whatever it is’.”

Software stocks like Salesforce, Datadog, and Adobe have seen drops in recent days. Meanwhile, precious metals were recovering from a severe two-day selloff, which drove silver down by as much as 30% in one day.

According to the Guardian, Morgan Stanley analysts said in a note on Thomson Reuters: “Anthropic launched new capabilities for its Cowork to the legal space, heightening competition within the space. We view this as a sign of intensifying competition, and thus a potential negative.”

On Wednesday, Google’s parent company Alphabet beat Wall Street expectations, reporting profit of $34.5B in the recently ended quarter, with revenue from cloud computing soaring 48%. It also plans to double its capital expenditure this year to as much as $185B. 

Gemini App also now has more than 750 million monthly active users, and, Google says, they are also seeing “significantly higher engagement per user, especially since the launch of Gemini 3 in December”.

But, does all this add up to the so-called ‘Death of SaaS’? That narrative has been around for a while, but let’s take a slightly less alarmist look at that claim.

‘I Don’t Feel This Death of SaaS’ 

Global Field CTO at Snowflake, Fawad Qureshi, spoke to SF Ben at the Build Developer Conference in London on February 3. When asked about the ‘Death of SaaS’ narrative, Fawad introduced something he called the ‘Return on Hassle’ (ROH), comparable to the idea of a Return on Investment (ROI).

When comparing platforms or outsourcing services, the cost of human capital and the hassle that is eliminated by the premium service are often not factored into cost analysis, Fawad claims. 

A premium is paid for outsourcing in order to gain a hassle-free experience, similar to paying a gardener instead of having to do it yourself – which would be cheaper, but more of a hassle. So too will SaaS stick around, with enterprises paying a premium for the software, as long as they remain low-hassle. 

One of the arguments that could be made in favor of the ‘Death of SaaS’ position is that agentic AI, which aggregates company-wide context, could potentially reduce the need for centralized CRMs (like Salesforce). 

A classic use case for Salesforce back in the day was that, when one sales rep takes over from another and needs context on a potential lead, it’s all conveniently sitting in one centralized database, so the new rep – who might only have started working at the company that same day – knows all the relevant information and history regarding a particular lead. Handy! 

But what happens when all that context, like a customer’s contact information and purchase history, lives directly within Gmail, Google Drive, Slack, Teams, etc. – with AI agents able to pull it out at a moment’s notice? When you’re able to get a “360 view” of your customer just from the context within your existing channels, do you need something like a CRM? Obviously, the data is still required, but do traditional CRM systems like Salesforce become redundant (or at least, no longer worth the investment)? 

Fawad said: “As long as the SaaS is providing that hassle-free experience, what is the amount of hassle it is reducing, and what is the premium they are charging on top? That is going to be the balancing act. 

“If the companies feel, ‘We can deliver that, we can overcome that hassle, at much lower premium consistently’, then it will happen.” 

But, Fawad added, as a field CTO, he receives a lot of outreach, and just by looking at the emails, he can see which were generated by a bot and which ones had some effort put in. One, for instance, said that, as Snowflake CTO, he must be responsible for snowflake.com – which was likely an automated, low-quality message, because CTOs don’t look after websites. 

What this example shows, Fawad says, is that, if you just have an agent without context, the agents will do a lot of “spray and pray”, from a Salesforce perspective. That is to say, casting a very wide net, but with very low quality. 

He told us: “We are talking about lead gen and outreach and different kinds of activities without a database – they will have a challenge. So what is the quality of experience that you want to deliver to the end customer?” 

Fawad added that, if you go to almost any website these days, within 60 seconds, a chatbot will pop up. But, 90% of the time, he’s telling it he wants to speak to a human because he gets stuck in a loop due to the bot not having the full data context, or providing incomplete or circular information. 

He said: “For most of the organization, there’s still a data foundation challenge, and slapping an agent on incomplete data is never going to complete the story, or never going to solve the real problem. That’s why I don’t feel this, what the market is calling ‘Death of SaaS’. It’s always going to be hassle versus premium. That’s the ratio.” 

A Salesforce spokesperson stressed the success of Agentforce to SF Ben, pointing out that the AI product has 18,500 customers – 9,500 of which are paid – after just one year, making it the fastest-growing organic product in Salesforce history. They added that:

• The number of Agentforce customers is growing by almost 50% QoQ.
• In addition to net-new logos, the consumption flywheel is “spinning faster than anticipated.” More than 50% of Agentforce bookings came from existing customers “refilling the tank” (purchasing more credits).
• The number of Agentforce customers in production increased 70% in Q3.
• Agentforce ARR is now $540M (up 330% YoY). When combined with Data 360, ARR is nearly $1.4B.

The Salesforce spokesperson said: “The market is understandably excited about large language models, but as we’re hearing from our thousands of customers with enterprise AI in production at scale, the real business value doesn’t live in the model itself. It lives in the last mile: the software infrastructure that connects AI to trusted data, business logic, and governance so companies can produce predictable, accountable outcomes.

“LLMs are a powerful technology, but you can’t run a business on models alone. Enterprises need systems of record with institutional memory, security, deterministic controls, and observability – especially when customer data, financial decisions, or public safety are involved. Without that foundation and safety layer, AI initiatives struggle to move beyond experimentation.

“Salesforce is closing this gap with a trusted operating system for enterprise AI. With Agentforce, businesses can deploy autonomous, context-aware agents grounded in their data, workflows, and policies – so AI works safely and at scale.

“This shift is already playing out across thousands of companies, including in highly regulated industries like financial services, life sciences, and the public sector. Agentforce has become the fastest-growing organic product in Salesforce history, with strong adoption and accelerating production deployments of agents.”

Final Thoughts

Software firms are supposed to be benefiting from the rise of AI, but they’re also clearly feeling the ‘disruption’ themselves. If new tools like the improved Claude can automate legal work like reviewing contracts and regulatory compliance, then where will software tools that simply aid in the manual handling of these tasks be in five years’ time? 

However, it’s important to note that Anthropic stressed the plugin did not provide legal advice, saying: “AI-generated analysis should be reviewed by licensed attorneys before being relied upon for legal decisions.” Automation came for manual jobs like factory work, and there’s a narrative going on at the moment that the same will happen for white-collar work.

It seems, at least for now, there is a strong argument that the system of record is going to stick around. The stock market is reacting as if Salesforce – and software companies like it – are going to become irrelevant, but people are still going to need a CRM, with a simple database securely hosting information that is accessible by all relevant parties. 

It’s also worth noting Agentforce and Data 360 hit nearly $1.4B in annual recurring revenue (ARR), representing a 114% year-over-year (Y/Y) gain, in Salesforce’s Q3 results. So, even if the ‘AI killing SaaS’ narrative turns out to be true, Salesforce has clearly positioned itself to capitalize on that.