Jim Cramer explains why Salesforce stock has taken a hit

While CNBC’s Jim Cramer on Tuesday affirmed his confidence in Salesforce‘s business and management, he detailed what’s been weighing on the stock — namely worries that the cloud software outfit’s agentic artificial intelligence isn’t growing fast enough and skepticism about its costly new acquisition.

“This is a moment where you need to have some faith in management,” Cramer said. “I have faith, but you need to decide for yourself if you’re willing to trust Marc Benioff and his team, because, ultimately, that’s all this comes down to, and for many I know, that’s just not enough.”

Last week, Salesforce reported a solid earnings and revenue beat, and it issued upbeat guidance. The company also announced it would buy data management company Informatica for $8 billion, its most expensive deal since it acquired Slack for more than $27 billion in 2021. Shares of the company slumped following the quarter, and the stock is down 20.90% year-to-date.

According to Cramer, some on Wall street aren’t sold on the Informatica deal because they believe the company overpaid for Slack and don’t see obvious benefits from that purchase. He said he understands why the market may be reticent about the deal, but called it a “show-me story.” Cramer said he has heard CEO Marc Benioff make the case for Informatica, telling him in a recent interview that it helps enterprise customers better organize and standardize data. But Salesforce will have to prove over time that the deal is worth it, Cramer continued.

Investors are also concerned that Salesforce’s agentic AI platform isn’t ramping up fast enough, especially as its core sales and customer relationship management business slows, Cramer said. While he conceded that some segments are slowing, that’s “simply the law of large numbers,” and the same is true for a number of more mature businesses. He called Salesforce an earnings growth play, lauding its increasing profitability and the momentum of its AI arm. To Cramer, the company’s agentic AI platform needs some “more bold-faced customer wins,” and Salesforce needs to prove the product allows enterprises to replace workers.

“In the end, look, I’m going to stick with Salesforce because they’ve got an incredible track record,” he said.

Salesforce did not immediately respond to request for comment.

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Disclaimer The CNBC Investing Club holds shares of Salesforce.