Salesforce price increases could boost 2027, 2028 revenues: Morgan Stanley

Salesforce’s (NYSE:CRM) recent price increases for its Enterprise and Unlimited Editions for Sales Cloud, Service Cloud, Field Service, and select Industries products could boost 2027 and 2028 revenues, Morgan Stanley said.

“…[First] pass analysis suggests pricing could drive our Subscription Revenue estimates to $43.3B/$47.6B in FY27/FY28, or 1.2% and 1.0% ahead of our current model,” analyst Keith Weiss wrote in a note to clients.

Weiss, who has an Overweight rating and $404 price target on Salesforce, likened the price increases to those from 2023, when Salesforce upped its list prices by 9% on both new and renewal businesses. However, this time there is a specific focus on sales and service cloud and the enterprise and unlimited editions, Weiss said.

And considering that there is roughly a $63 per user per month spread in the Starter and Pro tiers compared to Enterprise and Unlimited tiers (which pay around $250 per user per month), it’s likely that around 70% of the annual contract value is for Enterprise and Unlimited, Weiss explained.

“Despite the headline announcement suggesting ~6% list price increases on average, our analysis assumes a conservative ~4.5% uplift on new bookings and 4% uplift upon renewal of existing contracts,” Weiss added. “Taken together, we see scope for the announced list price increase to drive ~$1B of incremental revenue upside over the next two years, inflecting topline growth back into the double-digits.”