SAP cloud business is growing strongly

SAP headquarters in Walldorf

The Dax group wants to significantly increase profitability in the current year.

(Photo: IMAGO/Arnulf Hettrich)

Dusseldorf Despite macroeconomic uncertainties, SAP got off to a robust start in the new year: In the first quarter, sales rose by ten percent year-on-year to €7.4 billion, slightly more than analysts had expected. The business with cloud services, in which the Dax group posted an increase of 24 percent to 3.2 billion euros, made a particular contribution to this.

Adjusted for special effects, the operating profit also increased in double digits in the first quarter. The “high growth momentum in the cloud business” is continuing and is thus contributing to the strong increase in sales and operating profit, said SAP CEO Christian Klein when the figures were published on Friday.

The economic environment is difficult. “Customers are under cost pressure,” says Klein. However, SAP helps companies to automate business processes and change business models. The topic of sustainability is also important – the group wants to enable CO2 balancing with its software, for example.

SAP benefited from this with its core product S/4 Hana, which companies use to control central business processes such as finance, logistics and procurement. Revenue from the cloud version increased by 77 percent to EUR 716 million. For the next twelve months, SAP has a total of 11.15 billion euros worth of cloud orders on its books, 25 percent more than a year ago.

The business with software licenses, which is considered to be obsolete in the cloud age, developed better than expected at the beginning of the year: Revenue fell moderately by 13 percent to EUR 276 million.


CFO Dominik Asam told Handelsblatt that SAP was able to conclude some large contracts that had been under negotiation for a while. “But we think that’s more of a temporal shift than a fundamental change in the trend.”

High restructuring and compliance costs

However, special effects weighed on the operating result, the IFRS key figure fell by 45 percent to 803 million euros. In view of the recently higher share price, SAP had to budget 553 million euros more for share-based payments. In addition, there were 260 million euros in restructuring costs, in which up to 3,000 employees are to leave the company.

In addition, SAP adjusted earnings by €170 million for unspecified compliance issues. The deferral shows progress “in our tireless efforts to put these things behind us,” Asam said, without giving details.

In the recently published annual report, SAP wrote that there were investigations by the US Securities and Exchange Commission and the US Department of Justice. According to information from corporate circles, these are related, among other things, to allegations of corruption in South Africa.

>> Read here: The new chief financial officer wants to make SAP more efficient

SAP excluded the business of the subsidiary Qualtrics from the result. The software manufacturer recently announced that it would sell its majority stake in the financial investor Silver Lake and the pension fund CPP. The transaction is expected to be completed in the second half of the year.

SAP reports Qualtrics’ business as discontinued until sale. The company, which offers a cloud platform for online market research, generated sales of EUR 374 million in the first quarter – the majority with cloud products – and profit after tax of EUR 104 million.

Stock benefits from analysts’ opinions

In view of the sale, SAP has adjusted its forecast for the current year downwards: cloud revenues are expected to be EUR 1.3 billion lower and in a range of EUR 15.3 billion to EUR 15.7 billion. The group expects a loss of 200 million euros in operating profit.


After the figures were published, the SAP share was initially in the red, but later rose sharply and on Friday afternoon was sometimes more than six percent up at a good 122 euros. According to market observers, this was due to the fact that sales and adjusted operating profit were above expectations.

In addition, the new CFO Dominik Asam emphasized the importance of costs, said Mirko Maier, an analyst at LBBW. “That gives hope for leeway in the medium-term goals.”

In the past few weeks, the share had already gained significantly in value. The software manufacturer benefits from the fact that technology stocks are in demand again after a period of weakness. In addition, the financial analysts are increasingly optimistic about the business of the Dax group.

Goldman Sachs, for example, expects the first quarter to demonstrate the resilience of the cloud business. Several investment banks have therefore raised their price targets, which is increasing demand on the stock exchange.

More: New attempt in mass business: SAP presents product package for medium-sized companies.

First publication: 04/21/23, 08:11.

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