Is Salesforce Still The Business You Bought?

If you hold Salesforce (CRM), you likely bought into a subscription software provider known for steady growth and reliable cash generation. During its fiscal Q2 2027 earnings call in August, management noted that a $25 billion accelerated share repurchase was still under way. Has a buyback of that size changed the company behind your shares?

Partly: Salesforce’s Balance Sheet Has Changed

While the core software operation looks much as it did a year ago, the underlying balance sheet looks starkly different. Debt accounted for 38.1% of the company’s assets during fiscal Q2 2027, the latest reported quarter. For the fourteen years prior to the past year, that metric typically sat around 14.8%. In absolute terms, Salesforce held total debt of $41.7 billion at the end of the quarter. That compares with just $11.4 billion in cash and short-term investments.

Why Is Salesforce’s Debt So High?

Salesforce is currently spending more on its own stock than its operations generate. The company deployed $35.1 billion for buybacks over the last twelve months, yet its free cash flow over the same period came in at $15.2 billion. Bridging that shortfall required Salesforce to rely on existing cash reserves or tap debt markets. During the August call, management said it expects to buy back at least 14% of the shares outstanding through the accelerated program.

The underlying business still resembles the enterprise of a year ago. Salesforce recorded an operating margin of 22% over the last twelve months, climbing slightly from 21% a year earlier. Management noted that customer attrition sits near its lowest level ever. Meanwhile, fiscal Q2 2027 revenue grew 11% from a year earlier in constant currency.

What Do You Get For Salesforce’s Debt?

Shareholders walk away with a larger slice of the business. Salesforce reported 821 million diluted shares in the latest reported quarter, a drop from 962 million a year earlier. Each remaining share now holds a claim on a larger portion of the profit. The company has also acquired this stock at a discount to current trading levels. Management noted in August that shares purchased so far under the accelerated program cost an average of $176 each, below the $229.13 price where the stock now trades.

The tradeoff comes in the form of the debt Salesforce now carries. After subtracting cash, Salesforce carries debt equal to about 1.8 times a year of its earnings before interest, taxes, depreciation and amortization. The company must service interest on those obligations before any cash can reach shareholders.

For years, investors could assume Salesforce held modest debt relative to its assets. That is no longer the case, even if the underlying business margins have held steady over the past year. A smaller share of debt against assets in the next quarterly report would suggest the debt is weighing less on the business. Conversely, a larger share would signal that the debt is weighing more heavily on the business.

Does This Mean You Should Act On CRM?

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