SAP is generating substantial earnings
Following a dazzling quarterly performance, SAP ups its growth and earnings projections. Particularly, AI applications are powering this unanticipated financial strength. Shareholders are delighted.
Fueled by yet another surprisingly strong quarterly earnings, SAP has boosted its yearly objectives. "Our cloud growth has been extraordinarily robust," said SAP's European software giant CEO, Christian Klein, during a call. AI applications led the charge. "Roughly 30% of our cloud contract signings during the third quarter involved AI application scenarios."
The demand for resource planning programs (ERP) was remarkably high, added SAP's CFO, Dominik Assam. Here, the company witnessed a stellar 36% revenue surge. "This marks the eleventh straight quarter of growth above 30%." The Cloud ERP Suite now accounts for over a fifth of SAP's overall cloud revenue.
At the same time, the conventional software license business fared better than anticipated. This development was well-received by investors, as SAP's shares ascended by approximately 4% during post-market trading on Wall Street.
SAP heralds impressive growth
Cloud revenue ascended by 27% to 4.35 billion euros during the preceding quarter, while operating profit increased by 28% to 2.24 billion euros, surpassing market estimates. According to CFO Assam, this surge was the result of cost-cutting initiatives and fewer new hires. Enhanced profit margins and reduced taxes propelled free cash flow, a vital indicator for dividend distributions, by more than 44% to 1.25 billion euros.
This compelling financial data prompted SAP to revise its cloud and software revenue projections to 29.5 to 29.8 billion euros for the full year, up from 29 to 29.5 billion euros previously. Operating profit is now anticipated to hit 7.8 to 8 billion euros, up from 7.6 to 7.9 billion euros. When it comes to cash flow, SAP is expected to amass 3.5 to 4 billion euros, an upgrade from around 3.5 billion euros previously. "We're on course to meet our 2025 goals," reiterated SAP CEO Klein.
For the subsequent years, double-digit growth rates and heightened profits are on the horizon. SAP has once more set the price tag for its ongoing corporate transformation at roughly 3 billion euros. Preparing for the AI-driven future, SAP is scrutinizing up to 10,000 of its approximately 100,000 jobs. However, the workforce is expected to remain relatively unaltered through retraining and new hires in future-oriented areas.
Building on this momentum, SAP has updated its quarterly revenue forecasts. The new projections indicate a continued increase in quarterly figures.
The impressive growth trajectory has resulted in SAP revising its full-year cloud and software revenue estimates, which now stand at 29.5 to 29.8 billion euros, representing a strengthening of its quarterly figures.
