SAP SE gained the most in six years after Europe’s most valuable company reported first-quarter profit that topped analysts’ estimates, fueled by its pivot to cloud services.
Adjusted operating income rose 58% in constant currencies to €2.5 billion ($2.9 billion), the Walldorf, Germany-based company said in a statement on Tuesday. That compares with an average estimate of €2.24 billion by analysts compiled by Bloomberg.
SAP shares rose as much as 11% in Frankfurt on Wednesday, the biggest intraday jump since April 24, 2019. The stock has risen 36% over the last year and its value eclipsed Novo Nordisk A/S and LVMH in March.
SAP’s enterprise resource planning software — used for bookkeeping, procurement and human resources — generally requires customers to sign up for a contract, locking in a steady revenue stream. About 86% of SAP’s sales were from recurring revenue last quarter, helping insulate SAP from economic turbulence and fears of a US recession, Chief Executive Officer Christian Klein said in an interview on Bloomberg Television.
“Customers are coming to SAP with a need to focus on real cost savings, something SAP can clearly cater to given its mission-critical software nature,” Deutsche Bank analysts including Gianmarco Conti wrote in a note. SAP has “strength and resilience despite peak macro uncertainty,” they said.
Cloud revenue in constant currencies climbed 26% to €4.99 billion, compared with a €5.05 billion estimate. SAP confirmed its 2025 cloud revenue outlook of €21.6 billion to €21.9 billion. Still, the company said that “the prevailing dynamic environment implies elevated levels of uncertainty and reduced visibility.”
The current cloud backlog, which reflects sales that will be booked over the next 12 months, grew 29% in constant currencies to €18.2 billion.
SAP also embarked on a corporate overhaul with job cuts in early 2024, helping bolster profits.
The gains came amid a positive global backdrop after US President Donald Trump suggested he may back down from his tough trade stance on Beijing. A broader gauge of Asian equities was up more than 1%.
While SAP isn’t directly affected by US tariffs, its customers may already be reacting to the economic uncertainty. Growth in both its license and cloud subscription businesses decelerated in the first quarter, according to a survey this month of 30 SAP resellers conducted by Morgan Stanley analysts. The slowdown was driven mostly by the US, its biggest market.
What Bloomberg Intelligence Says:
SAP’s adjusted operating margin of 27.2%, roughly 250 bps above consensus, demonstrates that its aggressive cloud shift over the past 2-3 years is maturing, overshadowing slight misses to sales gains. Current cloud backlog growth of 29% in constant currency, in addition to reaffirming its 2025 targets, shows little sign of hindrance from rising uncertainty. —BI analystsAnurag Rana and Andrew Girard
“We see a very strong pipeline in the United States” despite recession concerns, Klein said. “What we are not seeing yet is that they are delaying projects or even cutting projects.”
Klein has prioritized the company’s shift to a subscription-based cloud business model, where average spending per client is higher. Under his leadership, the company is heavily promoting artificial intelligence business services in the cloud to incentivize customers to switch from legacy on-site servers.
SAP, which competes with Salesforce Inc., is less directly affected by US trade barriers than some other European technology giants. ASML Holding NV, which until October was the continent’s most valuable tech company, reported first-quarter orders last week that were almost a billion euros below expectations and warned the impact of recent tariff announcements remained unclear.
