This Software Stock’s Cash Yield Is Overlooked

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Investors paying $100 for Salesforce (CRM) stock today receive a business that produced about $8.30 of free cash flow over the last twelve months, compared with $4.20 for the median S&P 500 company. A valuation that low relative to cash generation usually points to one of two scenarios: a business on sale, or a business the market expects to shrink. So is Salesforce on sale, or shrinking?

Salesforce Looks Like A Business On Sale

A shrinking business would not register growth in both sales and cash, and Salesforce continues to expand on both fronts. Revenue increased 11.2% over the twelve months to July 31, 2026, while free cash flow rose to $15.2 billion from $12.5 billion a year earlier.

Shareholders hold a claim on the free cash Salesforce produces, just as they do on its profits, regardless of where the company allocates the money. Investors generally pay more for this cash generation once they notice it, and they pay more still when that cash keeps growing.

How Salesforce Turns Software Into Cash

Salesforce sells software ranging from Agentforce Service to Slack. Over the twelve months to July, the company retained 77.3% of its revenue after covering the direct costs of delivering those products. The operating margin reached 21.5%, up from 19.1% two years earlier.

Running the business also requires little capital. Over those twelve months, Salesforce put 3.8% of its cash from operations into capital spending, leaving nearly all of the money as free cash flow. It has stayed above zero in every twelve-month period since July 2023, and it has roughly doubled from the $7.56 billion recorded in the twelve months to July 2023.

The company does carry significantly more debt today. Total debt stood at $41.7 billion on July 31, 2026, compared with $11.2 billion a year earlier. Over those same twelve months, Salesforce spent $35.1 billion buying back its own shares. Net of cash, that debt equals 16.6% of the company’s market value, and a portion of the cash must service these obligations before benefiting the owners. Measured against the entire business, debt included, the cash yield falls to 7.1%.

Debt is easy to carry until money gets tight. In a squeeze, cash beats debt.

Salesforce Faces A Doubt About AI

Salesforce faces doubt over whether AI will replace the software it sells, a concern management addressed directly during its August 26, 2026 call. Executives said that skeptics expected the seats customers pay for to decline and customers to leave. Instead, management said seats across the sales, service and Slack products grew from a year earlier, while the rate at which customers left sat near its lowest level ever.

Slower growth has appeared in certain areas of the business. Revenue from Agentforce Marketing and Agentforce Commerce grew 2.8% in fiscal 2026, which ended January 31, 2026. That marks a slowdown from 7.5% the year before, though management said marketing showed early signs of recovery in the quarter to July 31, 2026. Executives also expect free cash flow to grow 4% to 5% in fiscal 2027, following a rise of about 16% in fiscal 2026.

Management is betting on its own AI products to accelerate growth. In September, Salesforce established a revenue target of over $63 billion for fiscal 2030, compared with $43.9 billion over the last twelve months. Hitting that target requires annual growth of about 11%, keeping close to the current pace.

For shareholders, the open questions are whether Salesforce’s free cash flow keeps growing, with management guiding to 4% to 5% for fiscal 2027, and whether the company carries its $41.7 billion of debt with ease. Salesforce is expected to report its fiscal third quarter in December 2026, and free cash flow and total debt are the figures to watch.

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