Hi,
This is a common limitation because the standard Excel Online (Business) connector only supports .xlsx files and cannot read or convert .xls files directly.
Here are the best ways to solve this:
Solution 1: Power Automate Desktop (Native & Free Workaround)
This is the most reliable "native" Microsoft solution that does not require buying a third-party subscription. You use the "Robotic Process Automation" (RPA) capabilities of Power Automate.
Create a Power Automate Desktop (PAD) Flow:
Launch Excel: Set it to open the specific .xls file (or use a variable for the file path).
Save Excel As: Configure this action to save the document with the Excel Workbook (.xlsx) format.
Close Excel: Close the instance.
Connect to Cloud Flow:
In your standard Cloud Flow (Outlook -> SharePoint), add an action "Run a flow built with Power Automate for desktop".
Pass the file path of the saved .xls file to the desktop flow.
Once the desktop flow finishes, the .xlsx version will exist in the folder, and you can proceed to use it with Power BI.
Solution 2: Third-Party Connectors (Easiest)
If your organization allows premium connectors, this is the simplest method as it requires no code or desktop gateways.
Encodian: Has a specific "Convert Excel" action that accepts .xls and outputs .xlsx.
Plumsail: Offers a "Convert file" action that supports XLS to XLSX.
Cloudmersive: Also offers conversion actions.
Note: These usually require a subscription after a free trial.
Solution 3: Azure Function (Pro-Code)
For a purely cloud-based solution without third-party fees, a developer can write an Azure Function (using C# and a library like NPOI) to convert the file stream from XLS to XLSX and call this function from Power Automate via HTTP.
This video demonstrates the conversion process using a third-party connector (Plumsail), which is one of the direct ways to handle this specific file format limitation in the cloud.