SAP tops cloud demand forecasts, keeps full-year operating profit outlook
Strong enterprise software demand is lifting SAP's cloud pipeline in the third quarter as the German group outperforms market expectations on a key forward-looking metric. The company says full-year cloud and cloud and software revenue is set to land at the upper end of its guidance ranges, while its operating profit outlook remains unchanged.
Highlights
- SAP's current cloud backlog in Q3 rose 26% at constant currencies to 24.14 billion euros, surpassing UBS's 24%-25% growth forecasts.
- Cloud revenue grew 26% to 6.67 billion euros and non-IFRS operating profit increased 18% to 3.03 billion euros in the third quarter.
- SAP maintained its full-year non-IFRS operating profit guidance at 11.8 billion euros to 12.2 billion euros and expects cloud and software revenue at the upper end of ranges.
Third-quarter cloud performance and guidance
As reported by Reuters, SAP says its current cloud backlog rises 26% at constant currencies to 24.14 billion euros, ahead of the 24% to 25% growth UBS had forecast.The company also says cloud revenue rises 26% to 6.67 billion euros in the third quarter. Non-IFRS operating profit increases 18% to 3.03 billion euros, while SAP maintains its full-year operating profit outlook at 11.8 billion euros to 12.2 billion euros at constant currencies.
SAP adds that full-year cloud and cloud and software revenue will come in at the upper end of its outlook ranges.
Implications for Europe's software sector
SAP's update points to continued resilience in business spending on cloud software, even as investors closely watch corporate technology budgets across Europe. Beating forecasts on cloud backlog, a measure of future contracted demand, strengthens the company's position as Europe's largest technology group.Keeping the yearly operating profit outlook unchanged also suggests SAP is balancing growth in cloud sales with margin discipline. The figures are likely to be read as a positive signal for enterprise software demand in Germany and the broader European technology market.
Our earlier coverage of Wipro’s second-quarter results noted that the company beat revenue expectations as European client spending began to recover after a period of restrained tech budgets. We also highlighted how artificial intelligence-related services were opening new revenue streams, offering another indicator that corporate demand for technology projects is stabilizing.
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