Core Viewpoint - SAP's shares experienced volatility in early trading following the company's forecast for full-year cloud revenue, which is projected to be at the lower end of its outlook range [1] Company Summary - SAP is identified as Europe's largest software maker [1] - The forecast for cloud revenue indicates potential challenges in meeting market expectations [1]

Core Insights - SAP is positioning itself as a significant player in the enterprise AI space, with CEO Christian Klein stating that AI is the primary driver for customer deals [1] - The company reported a 23% increase in its cloud backlog, reaching €18.8 billion in Q3 [2] - SAP's revenue grew by 7% to €9.08 billion ($10.53 billion), with cloud revenue increasing by 22% due to gains in AI and data cloud market share [3] Financial Performance - SAP's revenue for the upcoming year is largely secured, with 80-85% already accounted for after Q4 [2] - The company is guiding towards the lower end of its cloud revenue forecast for the year, estimating between €21.6 billion and €21.9 billion [4] - Despite initial gains, SAP's shares fell by 2.5% after trading, reflecting a year-to-date decline of 3% [5] Market Position - Deutsche Bank has identified SAP as a "top pick" in the European tech and global software sector, despite the lower guidance for cloud revenue growth [4][5] - The company is navigating challenges such as lengthening deal cycles but continues to execute well in the market [5]

Core Insights - SAP's third-quarter revenue fell short of expectations, with cloud revenue growth at the slowest rate since 2023, but earnings exceeded estimates, increasing by 12% [2] - The company has guided its full-year operating profit to the upper end of its range, indicating a positive outlook despite the lower cloud revenue guidance [2] Financial Performance - Cloud revenue increased by 27%, and the current cloud backlog also grew by 27%, showcasing strong performance in this segment [4] - SAP's core ERP solutions grew by over 30%, indicating market share gains as peers grow in the mid-teens [5] Market Outlook - The pipeline for Q4 is strong, with expectations for significant revenue as many companies are looking to spend their budgets [5] - AI use cases are becoming increasingly relevant, with customers seeking solutions to enhance supply chain resilience and reduce costs [5][7] AI Integration - AI is embedded in every deal in the Q4 pipeline, highlighting its importance in customer decision-making [12] - The company is focusing on delivering AI value creation rather than competing in the infrastructure space, which is seen as a commodity [12][13] Customer Adoption - There is a notable shift in customer sentiment towards cloud solutions, with a consensus that moving to the cloud is essential for accessing innovation and AI capabilities [10] - Customers are increasingly adopting AI tools for practical applications, such as sourcing and procurement, leading to higher usage rates [7] Future Expectations - The order backlog for the next year looks promising, with 80-85% of next year's revenue already secured after Q4 [14] - The company remains optimistic about closing the year strongly, which will positively influence investor outlook for the upcoming year [14]

Group 1 - The core viewpoint of the article highlights SAP's strong financial performance in Q3, with a 12% increase in IFRS operating profit to €2.49 billion and a 14% increase in non-IFRS operating profit to €2.57 billion, exceeding analyst expectations for earnings per share [2] - Non-IFRS basic earnings per share reached €1.59, surpassing analyst expectations of €1.49 [2] - Operating cash flow grew by 7% to €1.5 billion, while free cash flow increased by 5% to €1.27 billion [2] Group 2 - Cloud business backlog orders rose by 23% to €18.84 billion [2] - Cloud revenue increased by 22% (27% at constant currency) to €5.29 billion, slightly below analyst expectations of €5.33 billion [2] - Software licensing revenue declined by 43% (42% at constant currency) to €160 million [2] - Total revenue from cloud and software grew by 8% (12% at constant currency) to €8.02 billion [2]

Core Viewpoint - SAP's third-quarter financial results showed overall stability, but cloud business revenue fell short of market expectations, leading to a post-market stock drop of approximately 4% [1][3]. Financial Performance - Operating profit increased by 12% to €2.49 billion, with an operating margin rising by 1.3 percentage points to 27.4%. Non-IFRS operating profit grew by 14% to €2.57 billion, with a constant currency growth of 19% [4]. - Basic earnings per share (EPS) rose by 37% to €1.72 under IFRS, and by 29% to €1.59 under non-IFRS, exceeding analyst expectations of €1.49 [5]. - Operating cash flow grew by 7% to €1.5 billion, while free cash flow increased by 5% to €1.27 billion [5]. Cloud Business Insights - Cloud business backlog orders grew by 23% to €18.84 billion, with a constant currency growth of 27% [5]. - Cloud revenue increased by 22% to €5.29 billion, but fell short of analyst expectations of €5.33 billion; cloud ERP suite revenue grew by 26% to €4.59 billion, with a constant currency growth of 31% [5]. - Cloud business gross profit rose by 24% to €3.95 billion under IFRS, and by 24% to €3.97 billion under non-IFRS, with a constant currency growth of 28% [9]. Revenue Breakdown - Total revenue from cloud and software grew by 8% to €8.02 billion, with a constant currency growth of 12% [7]. - Service revenue increased by 2% to €1.06 billion, with a constant currency growth of 6%. Overall revenue grew by 7% to €9.08 billion, with a constant currency growth of 11% [8]. - Software licensing revenue declined by 43% to €160 million, with a constant currency decline of 42% [6]. Future Outlook - For 2025, SAP expects cloud revenue to be at the lower end of the guidance range, between €21.6 billion and €21.9 billion, with a year-on-year growth of 26% to 28% [11]. - Non-IFRS operating profit is projected to be at the upper end of the guidance range, between €10.3 billion and €10.6 billion, with a year-on-year growth of 26% to 30% [12]. - Free cash flow is anticipated to be between €8 billion and €8.2 billion [13]. Market Context - SAP's stock has declined approximately 9% over the past three months, and the company was previously seen as a potential challenger to the U.S. tech giants [14][16]. - The CEO highlighted strong cloud revenue growth of 27% and expressed confidence in achieving faster overall revenue growth by 2026 [17]. - Analysts noted that trade disputes and economic weakness have impacted sales, particularly from manufacturing clients [18][19].

Core Viewpoint - SAP SE's third-quarter cloud revenue fell short of analyst expectations, indicating that trade disputes and economic weakness are impacting sales [1][2] Financial Performance - Adjusted cloud revenue for Q3 was €5.29 billion (approximately $6.1 billion), below the market expectation of €5.33 billion, with a year-over-year growth rate of 22%, marking the slowest growth since Q4 2023 [1] - Overall revenue grew by 7% to €9.08 billion (approximately $10.59 billion), also missing analyst expectations of €9.17 billion [1] - Non-IFRS operating profit increased by 14% to €2.57 billion, slightly above the expected €2.55 billion [1] - Free cash flow available for dividends grew by 5% to €1.27 billion [1] Strategic Insights - The company is undergoing a strategic transformation under CEO Christian Klein, shifting from traditional software licensing to subscription services, with a focus on cloud business sales [1] - CFO Dominik Asam noted that despite uncertainties in the macroeconomic environment, the company maintains a growth momentum [1] Market Reaction - Following the earnings report, SAP's American Depositary Receipts (ADR) fell by approximately 6% in after-hours trading, although the stock price in Frankfurt has remained relatively stable throughout the year [2] Future Outlook - SAP updated its 2025 cloud revenue forecast, expecting it to approach the lower end of the previous range of €21.6 billion to €21.9 billion, indicating a projected growth of 26% [2] - The company anticipates adjusted profits to be at the upper end of the previously set range of €10.3 billion to €10.6 billion, with free cash flow expected to reach €8 billion to €8.2 billion, exceeding earlier expectations of around €8 billion [2] Industry Context - Analysts, including Derrick Wood from TD Cowen, noted that some transactions in Q3 were delayed due to "tariff turmoil," particularly affecting the manufacturing customer segment [2] - Analysis of U.S. government activities indicated a decrease in SAP's order volume in Q3, with cuts in government spending impacting business [2]

Financial Data and Key Metrics Changes - In Q3 2025, cloud revenue rose by 27%, maintaining over 25% growth for five consecutive quarters, with a solid cloud gross margin of approximately 75% [6][22] - Total revenue increased by 11% to €9.1 billion, with the share of predictable revenue rising by two percentage points to 87% [7][24] - Current cloud backlog increased by 27%, exceeding €18.8 billion [22] - Free cash flow increased by 5% to €1.3 billion, while operating profit rose by 19% to €2.6 billion [7][25] Business Line Data and Key Metrics Changes - The cloud ERP suite achieved its 15th consecutive quarter of growth exceeding 30%, representing 87% of cloud revenues and over 100% of the year-over-year increase in cloud revenues [20][22] - Software licenses revenue decreased by 42% in Q3 [23] Market Data and Key Metrics Changes - Cloud revenue performance was particularly strong in APJ and EMEA regions, with Brazil, France, Germany, India, Italy, and South Korea showing outstanding performance [24] - The U.S. public sector business is starting to pick up again, with a major framework contract awarded to SAP by the U.S. government [10][23] Company Strategy and Development Direction - The company aims to accelerate total revenue growth through 2027, leveraging AI as a key enabler of growth [5][19] - SAP's strategy focuses on providing software and cloud solutions without building infrastructure, partnering with strong cloud infrastructure partners instead [11][63] - The company is enhancing its AI capabilities, emphasizing the integration of AI with business processes and contextual data to create high-value use cases [12][66] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the Q4 pipeline, noting that many stalled deals are now returning, particularly in the U.S. public sector and manufacturing [32][34] - The company anticipates reaching the lower end of its cloud revenue outlook for fiscal year 2025 due to delayed bookings but expects to exceed its operating profit outlook [26][25] Other Important Information - SAP closed its acquisition of SmartRecruiters, enhancing its capabilities in talent acquisition [22] - The company is seeing significant interest in its new software and cloud offerings for highly regulated customers and governments [12] Q&A Session Summary Question: Update on demand backdrop in U.S. public sector and manufacturing - Management noted positive early signs in the U.S. public sector and a strong Q4 pipeline, with many deals returning [32][34] Question: Insights on backlog and cloud revenue expectations - Management expressed confidence in achieving a good Q4 and picking up stalled pipeline deals, indicating optimism for cloud revenue growth [36][54] Question: Uptake of SAP ERP transition option - Management highlighted positive momentum in the pipeline and noted that the transition option is helping customers move to the cloud [40][41] Question: Competitive position versus Oracle - Management emphasized that SAP's strategy remains effective, focusing on value creation rather than infrastructure scaling [63][66] Question: Free cash flow guidance and conversion - Management indicated that Q4 free cash flow may be impacted by tax cash out phasing and other working capital factors [58][59]

Financial Data and Key Metrics Changes - In Q3 2025, cloud revenue rose by 27%, maintaining over 25% growth for five consecutive quarters, with a solid cloud gross margin of approximately 75% [6][22] - Total revenue increased by 11% to EUR 9.1 billion, with the share of predictable revenue rising by 2 percentage points to 87% [7][22] - Current cloud backlog increased by 27% to exceed EUR 18.8 billion [22] - Free cash flow increased by 5% to EUR 1.3 billion, while operating profit rose by 19% to EUR 2.6 billion [7][24] Business Line Data and Key Metrics Changes - The cloud ERP suite achieved its 15th consecutive quarter of growth exceeding 30%, representing 87% of cloud revenues and over 100% of the year-over-year increase in cloud revenues [20][22] - Software licenses revenue decreased by 42% in Q3 [23] Market Data and Key Metrics Changes - Cloud revenue performance was particularly strong in the APJ and EMEA regions, with Brazil, France, Germany, India, Italy, and South Korea showing outstanding performance [23] - The U.S. public sector business is starting to pick up again, with a major framework contract awarded to SAP by the U.S. Army [10][23] Company Strategy and Development Direction - The company aims to accelerate total revenue growth through 2027, leveraging AI as a key enabler for growth [5][19] - SAP's strategy focuses on providing software and cloud solutions without building infrastructure, partnering with cloud infrastructure providers instead [11][66] - The company is enhancing its AI capabilities by integrating AI into business processes and developing AI agents to automate and optimize operations [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the Q4 pipeline, noting that many stalled deals are now progressing, particularly in the U.S. public sector and manufacturing [32][34] - The company anticipates reaching the lower end of its cloud revenue outlook for fiscal year 2025 due to delayed bookings but expects to exceed previous targets for free cash flow [26][25] Other Important Information - SAP closed its acquisition of SmartRecruiters, enhancing its capabilities in talent acquisition [22] - The company is focusing on high-value AI use cases, emphasizing the importance of combining large language models with business processes and contextual data [12][49] Q&A Session Summary Question: Update on demand backdrop and backlog - Management noted positive early signs in the U.S. public sector and manufacturing, with a strong Q4 pipeline [32][34] Question: Delay in backlog and cloud revenue expectations - Management expressed confidence in achieving a good Q4 and picking up stalled pipeline deals [36][54] Question: Uptake of SAP ERP transition option - Management indicated positive momentum in the pipeline, with high interest in the transition option [40][41] Question: Competitive position versus Oracle - Management emphasized the strength of SAP's software and cloud offerings, stating that their strategy is proven and effective [62][66] Question: Free cash flow guidance - Management highlighted that Q4 cash flow may be impacted by tax payments and working capital fluctuations, but remains confident in achieving the target [58][59]

Financial Data and Key Metrics Changes - In Q3, cloud revenue rose by 27%, marking five consecutive quarters of growth exceeding 25% [7][8] - Total revenue growth was 11%, with current cloud backlog increasing by 27% [8][30] - Free cash flow increased by 5%, while operating profit rose by 19% [8][34] - Total revenue reached EUR 9.1 billion, up 11%, with predictable revenue rising to 87% [33][34] Business Line Data and Key Metrics Changes - The Cloud ERP suite delivered 31% growth in Q3, representing 87% of cloud revenues [30] - Software licenses revenue decreased by 42% in Q3 [32] - Non-IFRS cloud gross margin expanded by 1.1 percentage points to 75.1% [34] Market Data and Key Metrics Changes - Cloud revenue performance was particularly strong in APJ and EMEA regions, with Brazil, France, Germany, India, Italy, and South Korea showing outstanding performance [33] - The U.S. public sector is showing early signs of improvement, with a major framework contract awarded to SAP by the U.S. Army [32][34] Company Strategy and Development Direction - The company aims to accelerate total revenue growth through 2027, leveraging AI as a key enabler [7][28] - SAP's strategy focuses on software and cloud solutions rather than building infrastructure, partnering with strong infrastructure partners instead [16][88] - The introduction of AI agents and tools is central to enhancing customer value and operational efficiency [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the Q4 pipeline, indicating a strong recovery in the U.S. public sector and manufacturing [47][51] - The company anticipates reaching the lower end of its cloud revenue outlook for fiscal year 2025 due to delayed bookings [36][37] - Management remains optimistic about the potential for revenue acceleration in 2026, supported by a robust pipeline [77][78] Other Important Information - The acquisition of Smart Recruiters was completed, enhancing SAP's capabilities in talent acquisition [31] - The company is focusing on high-quality data and AI integration to drive business value [66][70] Q&A Session Summary Question: Update on demand backdrop in U.S. public sector and manufacturing - Management noted positive early signs in the U.S. public sector and a strong Q4 pipeline, indicating a recovery in these sectors [45][47] Question: Insights on backlog and cloud revenue expectations - Management expressed confidence in the Q4 pipeline and the potential for a better exit rate for CCB growth than previously expected [51][52] Question: Uptake of SAP ERP transition options - Management indicated positive momentum in the pipeline and high interest in the transition options, with expectations for initial deals in Q4 [54][58] Question: Competitive position versus Oracle - Management emphasized the strength of SAP's strategy and the value provided to customers, asserting that the current approach is effective [86][88] Question: Free cash flow guidance and conversion - Management highlighted the impact of tax cash out phasing and working capital dynamics on free cash flow expectations for Q4 [80][84]

Financial Data and Key Metrics Changes - In Q3 2025, cloud revenue rose by 27%, marking five consecutive quarters of growth exceeding 25% [5][20] - Total revenue increased by 11% to €9.1 billion, with a share of predictable revenue rising to 87% [21][24] - Current cloud backlog exceeded €18.8 billion, up 27% [20] - Free cash flow increased by 5% to €1.3 billion, while operating profit rose by 19% to €2.6 billion [24] Business Line Data and Key Metrics Changes - The cloud ERP suite delivered 31% growth in Q3, representing 87% of cloud revenues [20] - Software licenses revenue decreased by 42% in Q3, indicating a shift towards cloud solutions [21] Market Data and Key Metrics Changes - Cloud revenue performance was particularly strong in APJ and EMEA regions, with Brazil, France, Germany, India, Italy, and South Korea showing outstanding performance [22] - The U.S. public sector is showing early signs of improvement, with SAP NS2 awarded a major framework contract [10][21] Company Strategy and Development Direction - The company aims to accelerate total revenue growth through 2027, leveraging AI as a key enabler [4][18] - SAP's strategy focuses on providing software and cloud solutions without building infrastructure, partnering with cloud infrastructure providers instead [10][60] - The company is enhancing its AI capabilities, integrating AI into business processes to create high-value use cases [11][62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the Q4 pipeline, noting that many deals are returning, particularly in the U.S. public sector and manufacturing [30][33] - The company anticipates reaching the lower end of its cloud revenue outlook for fiscal year 2025 due to delayed bookings but expects to exceed its operating profit target [25][24] Other Important Information - The acquisition of SmartRecruiters was completed, strengthening SAP's capabilities in talent acquisition [20] - The company is focusing on high-quality data and AI integration to enhance customer value [48][62] Q&A Session Summary Question: Update on demand backdrop in U.S. public sector and manufacturing - Management noted positive early signs in the U.S. public sector and a strong Q4 pipeline, indicating a return of stalled deals [30][33] Question: Insights on backlog and cloud revenue expectations - Management expressed confidence in achieving a good Q4 and maintaining a strong pipeline for cloud revenue growth [35][52] Question: Uptake of SAP ERP transition option - Management indicated positive momentum in the pipeline, with high interest in the transition option helping to accelerate cloud adoption [39][41] Question: Competitive position versus Oracle - Management emphasized that SAP's strategy remains effective, focusing on software and cloud rather than infrastructure [60][62] Question: Free cash flow guidance and expectations - Management highlighted that Q4 cash flow may be impacted by tax payments and working capital fluctuations, but overall cash conversion remains strong [56][57]