Salesforce acquires Informatica to boost AI initiatives

Key Points

• Salesforce completes $8 billion acquisition of Informatica at a valuation 27% lower than initial talks amid slowed growth for both companies.
• Fear of recession and a trade war has reduced corporate spending, with Salesforce expecting sub-7% growth and Informatica forecasting flat revenue in the June quarter.
• The deal is designed to boost Salesforce’s AI-powered Agentforce platform by integrating Informatica’s data management tools to ensure better governance for AI agents.
• At $8 billion, this is Salesforce’s third-largest acquisition, and while some investors worry it signals a reliance on deals to spur growth, analysts call it a smart play for Agentic AI.

At a time when both businesses are under increasing pressure in a more competitive tech environment, Salesforce has finally finalized its long-discussed acquisition of Informatica, reaching a $8 billion deal that analysts say could strengthen its artificial intelligence strategy.

Salesforce acquires Informatica to boost AI initiatives

Salesforce publicly announced the agreement on Tuesday at a price significantly lower than Informatica’s valuation when talks first began a year ago. The Wall Street Journal cited data showing that the company’s price had increased by almost 27% at that time. Since then, the growth paths of Informatica and Salesforce have both slowed considerably, which is probably why there is now more pressure to finalize the deal.

Due to concerns about a possible recession and a trade war, corporate clients have reduced their spending. Analysts predict Salesforce will report its slowest growth rate on record Wednesday afternoon, with revenue growth expected to come in under 7% for the April-ending quarter. In its most recent earnings report, Informatica, a much smaller company, predicted flat revenue for the June quarter.

Agentforce and the acquisition

Investors see the acquisition as a calculated move, even though it won’t immediately address these obstacles. Agentforce, Salesforce’s AI-powered agent platform that debuted in September, is anticipated to benefit from Informatica’s data management software. For enterprise software providers, AI agents—chatbots that carry out tasks on users’ behalf—have emerged as the newest battlefield. However, for these tools to work well, accurate data is necessary.

“Without proper governance and the ability to manage and contextualize data, which Informatica [Intelligent Data Management Cloud] excels at, the utility of what Salesforce AI generates is likely limited,” said Brad Zelnick of Deutsche Bank.

Salesforce has not revealed the true revenue generated by the product, but it did report over 3,000 paid Agentforce deals during the fiscal year that concluded in January. Salesforce still generates less than 3% of its total revenue from the $900 million in annual recurring revenue tied to its data cloud and AI products.

Wall Street has grown more cautious as analysts expect Agentforce to dominate Wednesday’s earnings call discussion. Some investors are concerned that Salesforce may be returning to its past practice of using acquisitions to boost growth, and other enterprise software providers have observed a more difficult environment for closing deals. However, this offer isn’t as significant as previous purchases. It is only Salesforce’s third-largest acquisition, costing $8 billion, which is only a quarter of what Salesforce paid for Slack in 2020.

“We think the deal is a smart play to bolster [Salesforce’s] Agentforce capabilities around the area of the stack it needs to advance most to unlock Agentic AI,” Derrick Wood of TD Cowen said.

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