Europe’s largest software manufacturer SAP surprised the analysts with its quarterly figures.
(Photo: Reuters)
Dusseldorf The software giant SAP has exceeded its earnings forecast, which it raised several times last year. Currency-adjusted operating profit for 2021 rose by one percent to 8.41 billion euros, SAP announced late Thursday evening. Most recently, the Walldorf group had increased the range from 8.1 to 8.3 billion euros in October.
The group’s sales climbed in the fourth quarter by six percent to almost seven billion euros. Revenues in the cloud division rose by 28 percent to 2.61 billion euros. Revenues from the core product S/4 Hana Cloud even increased by 65 percent to 329 million euros. With this, Europe’s largest software group shows that the turn towards cloud computing and away from software licenses is successful.
The growth in cloud computing is also reflected in the order backlog. Current cloud backlog grew 32 percent to €9.45 billion, exceeding SAP’s internal targets. Backlogs for S/4 Hana Cloud climbed 84 percent to €1.71 billion.
The shareholders welcomed the new figures with joy. After the announcement in the USA, the SAP price rose by around three percent, and the market capitalization increased by almost five billion euros. “Our strength in the cloud business is obvious,” said CEO Christian Klein. “The accelerated growth promises even greater opportunities in the future.”
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Investors are also positive about the news that SAP intends to buy its own shares worth one billion euros in 2022. The shares are to be passed on to employees in the “Move SAP” remuneration program. “We would like to further strengthen the equity culture in our workforce,” said CFO Luka Mucic.
Good prognosis for 2022
The new optimism at SAP is reflected in the forecast for the full year 2022. SAP expects cloud revenue to rise from €9.42 billion to as much as €11.85 billion year-on-year. Adjusted for currency effects, that would be growth of up to 26 percent.
Cloud and software revenue is expected to be between €25 billion and €25.5 billion over the same period, which equates to growth of just five to six percent excluding currency effects. The investments in the cloud are noticeable in the operating result: This should be between 7.8 and 8.25 billion euros and at best stagnate compared to the previous year or even shrink by five percent.
For SAP, the development of the cloud business is of central importance. Customers rely on cloud solutions because they are more flexible, mean more security and IT can be adapted to the needs of the company more quickly. It is almost inevitable that the software license and maintenance business will shrink at the same time.
The conversion requires investments that put pressure on the operating result. “Share-based payment programs” for Qualtrics managers also reduce profits – SAP bought the software company for eight billion dollars in 2018. Fourth-quarter operating income fell 45 percent to 1.47 billion euros and the operating margin fell 16.9 percentage points to 18.4 percent.
More: Christian Klein is attacking in the cloud business