Salesforce's Cash Engine Cools Off Amid Slower Growth

Salesforce (CRM) is trading near $260, about 98% of its 52-week high.

The company's newest AI product was built with Anthropic, and customers must move to premium editions before they can get it. However, only 5% of the knowledge workers using Salesforce's sales and service products have made that upgrade.

This means management is selling an upside of 60-80% when customers do upgrade, but the upgrade cycle with this much of the base left to convert does not finish quickly.

Salesforce's net margin is its widest in five years at 22.0%, while management's free-cash-flow growth guide for fiscal 2027 stands at half its earlier level of 9-10%.