SAP Shares Surge Following Strong Cloud Performance

By Hakan Ersen

FRANKFURT (Reuters) – Shares in SAP rose 5% at market open on Tuesday, reaching a record high of 221 euros ($239.21) after the German software company raised its full-year targets due to robust cloud business growth in the third quarter.

Cloud revenue increased by 27%, adjusted for currency fluctuations, totaling 4.35 billion euros ($4.71 billion) in the third quarter, driven in part by a 36% surge in sales of Cloud ERP Suite resource planning software.

CEO Christian Klein noted that artificial intelligence played a pivotal role in growth, stating, "Around 30% of our cloud contracts in the third quarter included AI use cases," in remarks made late Monday.

Barclays analysts, while maintaining their 2025 guidance, remarked that the new targets appeared conservative, noting management's proactive stance on this conservatism.

Operating profit climbed 28% to 2.24 billion euros, surpassing expectations, largely due to cost-reduction measures and a relatively low rate of new hiring, according to CFO Dominik Asam.

The company anticipates restructuring costs to reach around 3 billion euros as it evaluates up to 10,000 out of a total workforce of 100,000 in preparation for the AI era.

Consequently, the Walldorf-based company raised its full-year cloud and software revenue target to between 29.5 and 29.8 billion euros, up from 29 to 29.5 billion euros.

It also adjusted its 2024 operating profit forecast to 7.8 billion euros, an increase from the previous estimate of between 7.6 and 7.9 billion euros.

JPM analysts suggested that SAP's robust performance is indicative of the health of enterprise IT spending, particularly in software, referencing companies like Oracle (NYSE:ORCL), Workday (NASDAQ:WDAY), and Microsoft (NASDAQ:MSFT).

($1 = 0.9239 euros)