Salesforce (CRM)

Business Overview

Salesforce is mature seat-based subscription software: growth has slowed, and stock pay still sits between GAAP profit and cash. FY2026 (year to 31 January 2026) revenue was $41.5B, up 9.6%. Subscription and support were 94.9% of that ($39.4B). Gross margin was 77.7%. GAAP operating margin was 20.1%; on the company's adjusted basis, operating margin was 34.1%.

Sales and marketing was 34.5% of revenue. Stock-based compensation was 8.5%. Free cash flow was $14.4B, or 34.7% of revenue; after stock pay the margin was 26.2%. Total remaining performance obligations were $72.4B, with current RPO of $35.1B, up 16% from $30.2B. Attrition was about 8%, excluding Slack self-service and current-year acquisitions, on the definition in the FY2026 10-K and Q4 FY26 earnings exhibit. Capex was only 1.4% of revenue. R&D ran at 14.4%.

How the Numbers Read

Growth has slowed into the high single digits while cash conversion stays high. Revenue growth of 9.6% plus FCF margin of 34.7% sums to 44.3 before stock pay; after stock pay the sum is 35.8. The 8.5-point stock-pay wedge is part of why GAAP operating margin (20.1%) and adjusted operating margin (34.1%) sit so far apart.

Current RPO grew 16% (13% in constant currency, of which about 4 points came from Informatica, acquired in November 2025) against revenue growth of 9.6%. Attrition near 8% is not the same metric as a peer's net revenue retention: definitions differ on customer thresholds, Slack self-service and acquisitions. The definitions guide and the gross-versus-net guide walk those differences. Capex at 1.4% of revenue keeps the capital charge small beside stock pay.

How the Model Values This Kind of Company

For mature seat-based SaaS, the drivers that matter are net retention, new-customer growth, and the stock-pay wedge between GAAP profit and cash. Once growth slows into the single digits, sales and marketing intensity becomes an efficiency question: payback on that spend has to earn its keep.

Customers paying ahead credit working capital as revenue grows; capex is usually a small share of revenue. Free cash flow after charging stock pay as a cost is the economic headline beside reported FCF that adds it back.

What to Watch in the Financials

Attrition and its definition. About 8% in FY2026, with Slack self-service and current-year acquisitions excluded. A change in that exclusion list moves the rate without changing the underlying customer base.

Current RPO growth versus revenue growth. $35.1B (+16%, or 13% in constant currency including about 4 points from Informatica) against revenue +9.6%. Strip out currency and acquisitions before reading the gap as stronger bookings.

Stock pay as a share of revenue. 8.5% in FY2026. The FCF margin gap (34.7% to 26.2%) tracks this line.

Sales and marketing intensity. 34.5% of revenue. At single-digit growth, payback on that spend becomes the efficiency question.

Key Risks

Growth deceleration. At 9.6% revenue growth, expansion and new logos have to do more work relative to the installed base than they did at higher rates.

Stock-pay wedge. 8.5% of revenue sits between GAAP operating profit and cash after dilution. Buybacks can offset share count growth, but they do not erase the economic cost of that dilution.

Definitional retention. Attrition at about 8% is not comparable to a peer's dollar-based net retention without reading both definitions.

Sales and marketing load. At 34.5% of revenue, a further growth slowdown without cutting that line compresses both GAAP and free-cash margins.