Salesforce Inc (NYSE:CRM, XETRA:FOO) heads into its fiscal first quarter earnings report on May 27, with analysts at UBS pointing to a mixed demand environment for enterprise software and limited signs of near-term acceleration in bookings trends.
UBS wrote recent channel checks with roughly 25 enterprise IT executives and partners suggest IT spending growth remains constrained, particularly for non-AI application software. The firm characterized the broader SaaS demand backdrop as challenging and noted conditions may have tightened over the past few months.
For Salesforce specifically, UBS wrote that its latest checks were “mixed to in-line,” without evidence of a meaningful pickup in bookings that would support the company’s expectation for stronger growth in the second half of the fiscal year. By product area, feedback on Sales Cloud and Service Cloud was described as steady, while sentiment around Marketing Cloud, Commerce Cloud, Tableau, and MuleSoft remained mixed. Responses regarding Agentforce were also described as more mixed compared with the prior quarter.
The analysts believe this combination leaves the bar for a second-half growth reacceleration relatively high, given the current demand environment. They added there is uncertainty around whether Salesforce can sustain its guidance for improving growth through the remainder of the year if enterprise software spending conditions do not strengthen.
More broadly, UBS wrote that investor sentiment across application software remains subdued, with limited evidence so far that customers are replacing core software systems with AI-driven alternatives. While that dynamic may reduce downside risk in the near term, it has not yet translated into a clear improvement in demand trends, according to the note.
UBS also highlighted a cautious stock setup, noting that while software equities have rebounded from prior lows, the recovery has not been accompanied by a clear uptick in April or May demand indicators. The firm estimated a 25% to 40% probability that Salesforce could either soften or only modestly achieve its second-half acceleration outlook, depending on end-market conditions.
UBS maintained a 'Neutral' rating on the stock, reflecting what it described as a balance between muted expectations and ongoing uncertainty around enterprise software spending and the timing of any AI-driven uplift in core application demand.
On valuation, UBS noted that Salesforce trades at approximately 11 times estimated 2026 free cash flow and 22 times GAAP earnings, which it described as reasonable on a cash flow basis but less compelling on earnings.
The firm lowered its price target to $185 from $200, citing a reduced valuation multiple applied to its 2027 free cash flow estimate and a more cautious view of sector-wide demand trends.
Shares of Salesforce traded up almost 2% at $180 on Friday afternoon.