Salesforce Stock Slides After Morgan Stanley Downgrade Cites Slowing Growth

Salesforce (CRM) shares fell sharply in pre-market trading Tuesday after Morgan Stanley downgraded the stock, expressing concern that the company's artificial intelligence advancements are not translating into stronger core revenue.

Analyst Actions Trigger Sell-Off

Morgan Stanley was the primary catalyst for the decline, cutting its rating on Salesforce to Equalweight from a previous Overweight. The firm also slashed its price target on the stock to $185 from $287.

In a note to clients, analyst Adam Wood highlighted a "troubling gap" between the company's progress in AI and its underlying subscription revenue growth, which he said continues to deteriorate. The report cited persistent underperformance in the company's Commerce and Tableau segments as a structural drag on results.

Adding to the negative sentiment, investment firm CLSA initiated coverage on Salesforce with a Hold rating and a $165 price target. CLSA noted it would remain on the sidelines, estimating the company's organic growth is running at only about 6% year-over-year.

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Market Impact and Context

The stock dropped 4.1% in pre-open trading, bucking a positive trend in the broader market. The selling pressure on Salesforce was a company-specific event, as the S&P 500 and Nasdaq both posted gains.

The decline adds to a difficult year for the software company, which was already down approximately 34% year-to-date before Tuesday's session. The broader software sector has faced headwinds in 2026 amid concerns that new AI tools could erode demand for traditional software-as-a-service (SaaS) platforms.

While Goldman Sachs reiterated a Buy rating and a $242 price target, citing an expected growth acceleration in the third quarter, its bullish stance was not enough to offset the impact of the dual downgrades.