Prediction: 2025's Second-Worst-Performing Dow Jones Stock Will Beat the Market in 2026

CRM +1.05% ^DJI +0.61% ^GSPC +0.54% UNH +0.02%

Key Points

• Investors have lost money on Salesforce over the last five years.

• The company’s business model is being challenged by artificial intelligence.

• The stock is now too cheap to ignore.

• 10 stocks we like better than Salesforce ›

The Dow Jones Industrial Average (DJINDICES: ^DJI) isn't doing quite as well as the S&P 500 and Nasdaq Composite year to date, but it's still having a great year -- up 12.2% at the time of this writing. However, there are some key Dow components that have been drastically underperforming the index, including Salesforce (NYSE: CRM), which is down 31.0% in 2025. The only Dow stock to have a worse year so far is UnitedHealth Group.

Salesforce has tumbled 14.9% since being added to the Dow on Aug. 31, 2020. During that same period, the Dow is up 66.5%, and the S&P 500 has nearly doubled.

Here's why Salesforce has likely reached its bottom, and why investors should take a closer look at the software-as-a-service (SaaS) company for 2026.

Salesforce's growth is slowing despite its push into agentic AI

Salesforce is a textbook example of why even the most seemingly impenetrable moats are susceptible to disruption.

Salesforce specializes in customer relationship management (CRM) software, which is used by sales teams worldwide to manage customer accounts, maximize the conversion of prospects into actual sales, and more. Salesforce also owns cloud-based messaging platform, Slack, and data visualization giant, Tableau.

The company's suite of tools is embedded with many large enterprise clients, but SaaS companies like Salesforce have experienced mixed reactions from investors as a result of artificial intelligence (AI).

While AI is leading to a surge in compute, networking, and infrastructure demand, the benefits aren't as clear-cut for software. The simplest reason for the dichotomy is that AI tools are really good at enhancing the capabilities of established ecosystems, which benefits companies that combine application software with infrastructure software.

For example, Microsoft's Dynamics 365 is a CRM platform that is arguably inferior to what Salesforce offers. However, when paired with Microsoft 365, Outlook, Teams, and Azure, the system becomes a well-oiled machine, avoiding the complications that come with integrating third-party solutions like Salesforce.

Salesforce's approach to AI has been purposeful and logical. The company has been deploying AI agents through its autonomous AI platform, Agentforce. Data-powered agents can help Salesforce users sort through information, manage the sales funnel, and act on data to maximize conversions. Agentforce appears to be a catalyst for growth on paper, but the pricing model is based partially on add-ons per user. Here's where things get tricky.

At its core, the AI value proposition centers around doing more with less. Salesforce's business model is still based heavily on user quantity. A greater number of total users paired with Agentforce equals massive growth potential. However, agentic AI tools like Agentforce can also be a victim of their own success as an organization may not need to purchase as many licenses if they can accomplish more with Agentforce-powered solutions.

Ultimately, the numbers don't lie -- Salesforce's growth has been slowing over the past several years. The company is only guiding for about 9% revenue growth for fiscal 2026, which ends next January. If you tune into a Salesforce earnings call, like the fiscal third-quarter call that will occur on Dec. 3, you'll likely hear a lot of confident rhetoric on Salesforce being a leader in AI, but that hasn't borne out consistently in the company's financial results, at least not yet.

To be fair, Salesforce isn't alone. Adobe is another SaaS heavyweight that has seen its stock plunge despite gains for the broad market indexes. The SaaS business model thrives when user counts are growing and clients are willing to pay higher prices per subscription. AI is challenging that model by empowering users to do more with less, and so far, Salesforce doesn't have a clear solution to offset slowing growth.

Salesforce is still an excellent business

Salesforce faces an uphill climb, but it's a mistake to completely underestimate this software juggernaut. You can buy the stock today for around its lowest price-to-sales valuation in the last decade.

The company is also a profitable cash cow with a 21.2% operating margin, and management is guiding for a non-GAAP (generally accepted account principles) full-year operating margin of 34.1% (up from 33.0% the previous year).

Salesforce sports a 20.3 forward price-to-earnings ratio and a mere 17.7 forward price-to-free-cash-flow ratio. That's attractive in this frothy market, even for what could be considered a legacy software giant.

On top of its low volatility, Salesforce has an impeccable balance sheet with roughly double the cash, cash equivalents, and marketable securities as long-term debt. Salesforce also began paying a quarterly dividend in 2024. It yields only 0.7%, but it's still an added incentive to hold the stock.

Salesforce is less risky thanks to its valuation

Salesforce is a compelling value for long-term investors because the beaten-down stock price reflects a significant amount of doubt. And when expectations are low for great companies, it's often an attractive buying opportunity.

That said, Salesforce isn't without its risks. On the Dec. 3 earnings call, investors should look for management to discuss the ways the company plans to leverage AI tools for top-line growth while maintaining its high margins. And if Salesforce continues to see its competitive advantages eroded by more integrated software suites like those offered by Microsoft, then it's unlikely its valuation will improve.

However, the stock is trading at a level where even modest results could still allow Salesforce to be a market-beating stock next year (even more so over the next three to five years), making it a solid contrarian buy for 2026.

Should you invest $1,000 in Salesforce right now?

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Daniel Foelber has positions in Adobe and has the following options: long January 2028 $300 calls on Adobe. The Motley Fool has positions in and recommends Adobe, Microsoft, and Salesforce. The Motley Fool recommends UnitedHealth Group and recommends the following options: long January 2026 $395 calls on Microsoft, long January 2028 $330 calls on Adobe, short January 2026 $405 calls on Microsoft, and short January 2028 $340 calls on Adobe. The Motley Fool has a disclosure policy.

Prediction: 2025's Second-Worst-Performing Dow Jones Stock Will Beat the Market in 2026 was originally published by The Motley Fool