Software vendor - SAP is cutting more jobs than planned - profit grows strongly
SAP, Europe's largest software manufacturer, is expanding its layoff program due to high demand from employees. Instead of cutting 8,000 jobs, the company based in Walldorf announced that between 9,000 and 10,000 jobs will be eliminated. At the end of the second quarter, there were 105,315 full-time positions - a decrease of nearly 3,000 from the end of the first quarter.
Layoffs announced at the beginning of the year
The majority of the affected employees were expected to leave SAP, while the rest could continue their education or apply for other roles. It had already been hinted that the programs for severance pay and early retirement were well-received by the employees. Typically, older employees are more likely to be considered for these programs, who tend to receive higher salaries. Younger employees contribute, on average, lower salary costs.
The company had announced the layoffs in January and primarily justified it with the need for new jobs that would focus on Artificial Intelligence (AI). "With our planned transformation program, we will significantly increase investments in strategic growth areas, primarily in AI," SAP's CEO Christian Klein had said at the time. "This will enable us to develop leading innovations in the future and simultaneously improve the efficiency of our business processes."
Klein: Accelerated revenue growth by 2027
Klein confirmed that SAP still aimed to become the leading provider of enterprise AI. "Due to our progress and strong order pipeline, we are confident that we will achieve accelerated revenue growth by 2027."
The company still expects to reach a similar full-time employee count by the end of this year as at the beginning, with 107,602 full-time positions. Financial officer Dominik Asam spoke in a conference call about the need to hire more people in the second half of the year.
Second quarter surprisingly good
The layoffs are progressing faster than expected, and many new hires are only scheduled for the second half of the year. The operational result also surprised in the months of April to June, growing by one-third compared to the previous year to 1.94 billion Euro. Analysts had predicted a 24% increase. The revenue grew by 10% to 8.29 billion Euro. The cloud business, which grew by 25%, was the main driver.
The net income decreased significantly in the second quarter by 69% to 918 million Euro. This was mainly due to the billion-dollar one-time gain from the sale of the former US subsidiary Qualtrics the previous year, but also due to additional provisions for the increased layoffs.
Record stock price
The stock price soared after the announcements to a record high. SAP shares rose by about 6% to 194.84 Euro shortly after trading began on Tuesday. Like other tech stocks, the shares have been benefiting from the megatrend of AI for a long time. The stock price has risen by around 40% so far this year.
In terms of market capitalization, SAP has been the undisputed number one in the DAX for a long time. With a market capitalization of almost 240 billion Euro, the company is far ahead of the second-ranked Siemens, which brings approximately 140 billion Euro to the stock exchange.
- Despite the high demand for layoffs at SAP, which is headquartered in Walldorf, Germany, the company originally planned to eliminate between 8,000 and 10,000 jobs.
- Christian Klein, the CEO of SAP, stated that the company would increase investments in strategic growth areas primarily focused on Artificial Intelligence (AI), justifying the layoffs announced earlier in the year.
- The majority of the affected employees were expected to leave SAP, but some could continue their education or apply for other roles within the company, located in Baden-Württemberg.
- Despite the layoffs and the decrease in full-time positions, SAP still expects to reach a similar employee count by the end of this year, with around 107,602 full-time positions.
