SAP(SAP) - 2025 Q1 - Quarterly Report

Executive Summary & Highlights This section provides an overview of SAP's strong Q1 2025 performance, management commentary, key financial highlights, and strategic business updates Q1 2025 Performance Overview SAP reported strong Q1 2025 financial results, with significant growth in cloud revenue and operating profit, driven by expanding cloud backlog and a resilient business model Q1 2025 Performance Metrics | Metric | Q1 2025 (€ millions) | Q1 2024 (€ millions) | ∆ in % | ∆ in % const. curr. | | :--- | :--- | :--- | :--- | :--- | | Current cloud backlog | 18,202 | 14,179 | 28 | 29 | | Cloud revenue | 4,993 | 3,928 | 27 | 26 | | Cloud ERP Suite revenue | 4,251 | 3,167 | 34 | 33 | | Total revenue | 9,013 | 8,041 | 12 | 11 | | IFRS operating profit | 2,333 | -787 | NA | | | Non-IFRS operating profit | 2,455 | 1,533 | 60 | 58 | | Share of more predictable revenue (in %) | 86 | 84 | 2pp | | Management Commentary CEO Christian Klein highlighted the success of SAP's strategy, evidenced by strong cloud backlog and double-digit revenue growth, emphasizing the resilience of the business model and the role of AI. CFO Dominik Asam noted a solid start to the year with strong revenue and profit expansion, attributing it to cost discipline and focused execution, while maintaining vigilance in a volatile environment - CEO Christian Klein emphasized the success of SAP's strategy, with current cloud backlog expanding 29% at constant currencies and total revenue seeing a double-digit increase, supported by an 86% share of predictable revenue and an AI-powered portfolio[4] - CFO Dominik Asam highlighted a solid start to the year with strong total revenue growth and outstanding operating profit expansion, attributing these results to cost discipline and focused execution, while remaining vigilant regarding the broader economic environment[5] Financial Highlights Q1 2025 saw robust growth across key financial metrics, including cloud revenue, Cloud ERP Suite revenue, and significant increases in both IFRS and non-IFRS operating profit and earnings per share, alongside strong cash flow generation Q1 2025 Financial Performance | Metric | Q1 2025 (€ millions) | Q1 2024 (€ millions) | ∆ in % | ∆ in % const. curr. | | :--- | :--- | :--- | :--- | :--- | | Cloud revenue | 4,993 | 3,928 | 27 | 26 | | Cloud ERP Suite revenue | 4,251 | 3,167 | 34 | 33 | | Software licenses revenue | 183 | 203 | -10 | -10 | | Total revenue | 9,013 | 8,041 | 12 | 11 | | IFRS Cloud gross profit | 3,720 | 2,837 | 31 | | | Non-IFRS Cloud gross profit | 3,745 | 2,849 | 31 | 30 | | IFRS operating profit | 2,333 | -787 | NA | | | Non-IFRS operating profit | 2,455 | 1,533 | 60 | 58 | | IFRS EPS (basic) | 1.52 | -0.71 | NA | | | Non-IFRS EPS (basic) | 1.44 | 0.81 | 79 | | | Operating cash flow | 3,780 | 2,878 | 31 | | | Free cash flow | 3,583 | 2,642 | 36 | | - IFRS operating profit growth was positively impacted by a €2.2 billion decline in restructuring expenses compared to Q1 2024, due to the 2024 transformation program[12] Strategic Initiatives & Business Updates SAP continued its share repurchase program, concluded its 2024 transformation program, secured significant customer wins for its "RISE with SAP" and "GROW with SAP" offerings globally, and announced a new data solution and a dividend proposal Share Repurchase Program - As of March 31, 2025, SAP repurchased 18,985,135 shares at an average price of €164.79, totaling approximately €3.1 billion under the €5 billion program[15] - The third tranche of the share repurchase program, with a purchased volume of approximately €1.5 billion, was completed on April 8, 2025[15] 2024 Transformation Program - The 2024 transformation program concluded as planned in Q1 2025, with overall associated expenses of approximately €3.2 billion[16] - Restructuring payouts amounted to €2.5 billion for the full-year 2024 and €0.3 billion for Q1 2025, with approximately €0.4 billion expected in the remainder of 2025[16] Customer Wins & Regional Performance - Customers like HUGO BOSS, Hyundai Motor Company, Kia Corporation, and Tyson Foods chose "RISE with SAP" for end-to-end business transformations[17] - Gymshark and Oki Electric Industry selected "GROW with SAP" for rapid cloud ERP adoption[18] - SAP's cloud revenue performance was particularly strong in APJ and EMEA, and robust in the Americas, with outstanding results in countries like Brazil, Germany, India, and South Korea[21] Product & Dividend Announcements - SAP announced SAP Business Data Cloud on February 13, a solution designed to unify SAP and third-party data to foster reliable AI and impactful decisions[22] - A dividend of €2.35 per share for fiscal year 2024 was proposed, marking a 6.8% year-over-year increase, subject to shareholder approval[23] Outlook 2025 SAP's 2025 outlook projects significant growth in cloud revenue, cloud and software revenue, and non-IFRS operating profit, alongside strong free cash flow, despite a dynamic environment Financial Outlook Despite a dynamic and uncertain environment, SAP maintains its 2025 financial outlook, projecting significant growth in cloud revenue, cloud and software revenue, and non-IFRS operating profit at constant currencies, along with strong free cash flow - SAP expects current cloud backlog growth at constant currencies to slightly decelerate in 2025[24] 2025 Financial Outlook (at constant currencies) | Metric (at constant currencies) | 2025 Outlook | 2024 Actual | YoY Growth | | :--- | :--- | :--- | :--- | | Cloud revenue | €21.6 – 21.9 billion | €17.14 billion | 26% to 28% | | Cloud and software revenue | €33.1 – 33.6 billion | €29.83 billion | 11% to 13% | | Non-IFRS operating profit | €10.3 – 10.6 billion | €8.15 billion | 26% to 30% | | Free cash flow (actual currencies) | Approximately €8.0 billion | €4.22 billion | ~89% | | Effective tax rate (non-IFRS) | Approximately 32% | 32.3% | | Currency Impact SAP anticipates currency exchange rate fluctuations to impact actual reported figures for Q2 and FY 2025, with minor negative impacts projected for cloud and cloud and software revenue growth, and a neutral impact on non-IFRS operating profit growth Currency Impact on Growth | Metric | Q2 2025 Currency Impact | FY 2025 Currency Impact | | :--- | :--- | :--- | | Cloud revenue growth | -1.0pp | -0.0pp | | Cloud and software revenue growth | -0.5pp | -0.0pp | | Operating profit growth (non-IFRS) | 0.0pp | -0.0pp | Additional Information This section provides details on SAP's upcoming corporate events, including the Annual General Meeting and a financial analyst conference, along with an overview of SAP's business and standard legal disclaimers Corporate Events & Resources SAP announced its Annual General Meeting of Shareholders for May 13, 2025, as a virtual event, and a financial analyst conference on May 21, in conjunction with SAP Sapphire & ASUG Annual Conference Orlando - The Annual General Meeting of Shareholders will be held virtually on May 13, 2025[30] - A financial analyst event is scheduled for May 21, in conjunction with SAP Sapphire & ASUG Annual Conference Orlando[31] About SAP & Legal Disclaimers SAP, a global leader in enterprise applications and business AI for over 50 years, provides business-critical operations solutions. The report includes standard disclaimers regarding preliminary, unaudited information and forward-looking statements - SAP is a global leader in enterprise applications and business AI, providing solutions for finance, procurement, HR, supply chain, and customer experience for over 50 years[33] - The press release contains preliminary and unaudited information and includes forward-looking statements subject to risks and uncertainties[29][38] Financial and Non-Financial Key Facts This section presents a comprehensive overview of SAP's key financial and non-financial metrics for Q1 2025, including revenues, profits, backlog, cash flow, employee numbers, and environmental impact Financial and Non-Financial Key Facts This section provides a comprehensive overview of SAP's key financial and non-financial metrics for Q1 2025, with comparative data for previous quarters and full-year 2024, highlighting trends in revenues, profits, margins, backlog, cash flow, employee numbers, and environmental impact Q1 2025 Key Facts | Metric | Q1 2025 | Q1 2024 | % change yoy | % change constant currency yoy | | :--- | :--- | :--- | :--- | :--- | | Cloud Revenue | 4,993 | 3,928 | 27 | 26 | | Cloud ERP Suite Revenue | 4,251 | 3,167 | 34 | 33 | | Total Revenue | 9,013 | 8,041 | 12 | 11 | | Operating profit (IFRS) | 2,333 | -787 | NA | | | Operating profit (non-IFRS) | 2,455 | 1,533 | 60 | 58 | | Cloud gross margin (non-IFRS, in %) | 75.0 | 72.5 | 2.5pp | | | Operating margin (non-IFRS, in %) | 27.2 | 19.1 | 8.1pp | | | Current cloud backlog | 18,202 | 14,179 | 28 | 29 | | Free cash flow | 3,583 | 2,642 | 36 | | | Number of employees (quarter end) | 108,187 | 108,133 | 0.05 | | | Women in executive roles (in %, quarter end) | 23.7 | 21.7 | 2.0pp | | | Gross greenhouse gas emissions (million tons CO2 equivalents) | 1.6 | 1.8 | -11.1 | | Primary Financial Statements of SAP Group (IFRS) This section presents SAP Group's IFRS primary financial statements, including consolidated income statements, statements of financial position, and cash flow statements, for Q1 2025 Consolidated Income Statements SAP's IFRS consolidated income statement for Q1 2025 shows a significant turnaround from a loss to a profit, driven by strong revenue growth, particularly in cloud services, and a substantial reduction in restructuring expenses compared to the prior year Consolidated Income Statements | Metric (€ millions) | Q1 2025 | Q1 2024 | ∆ in % | | :--- | :--- | :--- | :--- | | Cloud | 4,993 | 3,928 | 27 | | Software licenses | 183 | 203 | -10 | | Total revenue | 9,013 | 8,041 | 12 | | Gross profit | 6,607 | 5,762 | 15 | | Restructuring | 0 | -2,242 | NA | | Operating profit (loss) | 2,333 | -787 | NA | | Profit (loss) after tax | 1,796 | -824 | NA | | Earnings per share, basic (in €) | 1.52 | -0.71 | NA | Consolidated Statements of Financial Position As of March 31, 2025, SAP's consolidated financial position shows an increase in total assets, primarily driven by higher cash and cash equivalents and trade receivables, while total liabilities also increased, mainly due to contract liabilities Consolidated Statements of Financial Position | Metric (€ millions) | 03/31/2025 | 12/31/2024 | | :--- | :--- | :--- | | Cash and cash equivalents | 11,345 | 9,609 | | Total current assets | 23,968 | 21,401 | | Total assets | 75,629 | 74,218 | | Contract liabilities (current) | 9,211 | 5,978 | | Total current liabilities | 20,550 | 19,078 | | Total liabilities | 29,543 | 28,410 | | Total equity | 46,086 | 45,808 | Consolidated Statements of Cash Flows SAP reported a significant increase in net cash flows from operating activities in Q1 2025, primarily due to higher profitability and a positive development in working capital, leading to a substantial rise in free cash flow Consolidated Statements of Cash Flows | Metric (€ millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Profit (loss) after tax | 1,796 | -824 | | Net cash flows from operating activities | 3,780 | 2,878 | | Net cash flows from investing activities | 43 | -986 | | Net cash flows from financing activities | -1,723 | -787 | | Net increase/decrease in cash and cash equivalents | 1,735 | 1,170 | | Cash and cash equivalents at the end of the period | 11,345 | 9,295 | Non-IFRS Numbers This section details SAP's non-IFRS financial measures, including their basis of presentation and comprehensive reconciliations to IFRS figures, along with adjustments by functional area Basis of Non-IFRS Presentation SAP utilizes non-IFRS financial measures, such as expense and profit measures, to provide supplemental information not prepared in accordance with IFRS, offering a clearer view of underlying business performance - SAP discloses non-IFRS financial measures to provide supplemental information not prepared in accordance with IFRS[48] Reconciliation from Non-IFRS Numbers to IFRS Numbers This sub-section provides detailed reconciliations between IFRS and non-IFRS figures for revenue, operating expenses, profit, and key ratios, illustrating the impact of adjustments on reported financial performance Reconciliation of Non-IFRS Revenue – Quarter | Metric (€ millions) | IFRS Q1 2025 | Currency Impact | Non-IFRS Constant Currency Q1 2025 | IFRS Q1 2024 | ∆ in % IFRS | ∆ in % Non-IFRS Constant Currency | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cloud | 4,993 | -58 | 4,936 | 3,928 | 27 | 26 | | Software licenses | 183 | 0 | 183 | 203 | -10 | -10 | | Total revenue | 9,013 | -97 | 8,916 | 8,041 | 12 | 11 | Reconciliation of Non-IFRS Operating Expenses – Quarter | Metric (€ millions) | IFRS Q1 2025 | Adj. Non-IFRS | Non-IFRS Q1 2025 | IFRS Q1 2024 | Adj. Non-IFRS | Non-IFRS Q1 2024 | ∆ in % IFRS | ∆ in % Non-IFRS | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cost of cloud | -1,273 | 24 | -1,249 | -1,091 | 12 | -1,079 | 17 | 16 | | Restructuring | 0 | 0 | 0 | -2,242 | 2,242 | 0 | NA | NA | | Total operating expenses | -6,680 | 122 | -6,558 | -8,828 | 2,321 | -6,507 | -24 | 1 | Reconciliation of Non-IFRS Profit Figures, Income Tax, and Key Ratios – Quarter | Metric (€ millions) | IFRS Q1 2025 | Adj. Non-IFRS | Non-IFRS Q1 2025 | IFRS Q1 2024 | Adj. Non-IFRS | Non-IFRS Q1 2024 | ∆ in % IFRS | ∆ in % Non-IFRS | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Operating profit (loss) | 2,333 | 122 | 2,455 | -787 | 2,321 | 1,533 | NA | 60 | | Profit (loss) after tax | 1,796 | -115 | 1,681 | -824 | 1,768 | 944 | NA | 78 | | Operating margin (in %) | 25.9 | | 27.2 | -9.8 | | 19.1 | 35.7pp | 8.2pp | | Earnings per share, basic (in €) | 1.52 | | 1.44 | -0.71 | | 0.81 | NA | 79 | Reconciliation of Free Cash Flow | Metric (€ millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash flows from operating activities | 3,780 | 2,878 | | Purchase of intangible assets and property, plant, and equipment | -168 | -187 | | Proceeds from sales of intangible assets and property, plant, and equipment | 38 | 27 | | Payments of lease liabilities | -68 | -78 | | Free cash flow | 3,583 | 2,642 | Non-IFRS Adjustments – Actuals and Estimates This section outlines the specific adjustments made to IFRS profit before tax to arrive at non-IFRS figures, including acquisition-related charges, restructuring, and gains/losses from equity securities, with estimates provided for full-year 2025 Non-IFRS Adjustments | Adjustment (€ millions) | Estimated Amounts for FY 2025 | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | :--- | | Acquisition-related charges | 380-460 | 123 | 79 | | Restructuring | ~100 | 0 | 2,242 | | Gains and losses from equity securities, net | N/A | -208 | 56 | | Profit (loss) before tax (IFRS) | | 2,468 | -980 | | Profit (loss) before tax (non-IFRS) | | 2,382 | 1,396 | Non-IFRS Operating Expense Adjustments by Functional Areas This section provides a detailed breakdown of non-IFRS operating expense adjustments by functional area, showing how acquisition-related charges and restructuring expenses are reclassified to present a clearer view of operational costs Non-IFRS Operating Expense Adjustments | Functional Area (€ millions) | IFRS Q1 2025 | Acquisition Related Adj. | Restructuring Adj. | Non-IFRS Q1 2025 | IFRS Q1 2024 | Acquisition Related Adj. | Restructuring Adj. | Non-IFRS Q1 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cost of cloud | -1,273 | 24 | 0 | -1,249 | -1,091 | 12 | 0 | -1,079 | | Research and development | -1,673 | 1 | 0 | -1,672 | -1,665 | 2 | 0 | -1,663 | | Sales and marketing | -2,235 | 95 | 0 | -2,140 | -2,278 | 64 | 0 | -2,214 | | Restructuring | 0 | 0 | 0 | 0 | -2,242 | 0 | 2,242 | 0 | | Total operating expenses | -6,680 | 123 | 0 | -6,558 | -8,828 | 79 | 2,242 | -6,507 | - Restructuring expenses, if not presented separately, would be allocated across various functional areas, with significant impacts on research and development, sales and marketing, and cost of services in Q1 2024[55] Disaggregations This section disaggregates SAP's financial performance by segment and region, and provides employee distribution across functional areas, offering a detailed view of the company's operational structure Segment Reporting SAP has revised its segment structure into Applications, Technology & Support (ATS) and Core Services, with both segments contributing to revenue and profit, reflecting the company's cohesive product portfolio and customer transformation support Segment Policies and Changes - SAP has revised its segment structure into two operating segments: Applications, Technology & Support (ATS) and Core Services[56] - The ATS segment represents SAP's cohesive product portfolio, while the Core Services segment supports the product portfolio by enabling customer business transformation and innovation adoption[59] Segment Reporting – Quarter Applications, Technology & Support (ATS) Segment (€ millions, non-IFRS) | Metric | Q1 2025 Actual Currency | Q1 2024 Actual Currency | | :--- | :--- | :--- | | Cloud | 4,993 | 3,928 | | Total segment revenue | 8,018 | 7,061 | | Segment gross profit | 6,434 | 5,616 | | Segment profit (loss) | 3,154 | 2,301 | Core Services Segment (€ millions, non-IFRS) | Metric | Q1 2025 Actual Currency | Q1 2024 Actual Currency | | :--- | :--- | :--- | | Services | 994 | 979 | | Total segment revenue | 994 | 979 | | Segment gross profit | 237 | 206 | | Segment profit (loss) | 87 | 41 | Revenue by Region (IFRS and Non-IFRS) SAP's Q1 2025 revenue showed strong growth across all major regions, with APJ leading in cloud revenue growth, and EMEA and Americas also contributing significantly to total revenue Revenue by Region (IFRS and Non-IFRS) – Quarter Cloud Revenue by Region (€ millions) | Region | Q1 2025 Actual | Q1 2024 Actual | ∆ in % Actual | ∆ in % Constant Currency | | :--- | :--- | :--- | :--- | :--- | | EMEA | 2,032 | 1,557 | 30 | 29 | | Americas | 2,231 | 1,847 | 21 | 19 | | APJ | 731 | 524 | 39 | 39 | | Total Cloud revenue | 4,993 | 3,928 | 27 | 26 | Total Revenue by Region (€ millions) | Region | Q1 2025 Actual | Q1 2024 Actual | ∆ in % Actual | ∆ in % Constant Currency | | :--- | :--- | :--- | :--- | :--- | | Total EMEA | 4,033 | 3,596 | 12 | 11 | | Total Americas | 3,665 | 3,337 | 10 | 8 | | Total APJ | 1,315 | 1,107 | 19 | 18 | | Total revenue | 9,013 | 8,041 | 12 | 11 | Employees by Region and Functional Areas As of March 31, 2025, SAP's total employee count remained stable year-over-year, with slight shifts in distribution across regions and functional areas, notably an increase in cloud and software employees Employees by Functional Area | Functional Area (Full-time equivalents) | 03/31/2025 Total | 03/31/2024 Total | | :--- | :--- | :--- | | Cloud and software | 13,862 | 13,122 | | Services | 18,639 | 18,763 | | Research and development | 36,902 | 36,540 | | Sales and marketing | 26,671 | 28,032 | | General and administration | 6,949 | 6,723 | | Infrastructure | 5,164 | 4,953 | | SAP Group Total | 108,187 | 108,133 | Other Disclosures This section provides additional disclosures, specifically detailing share-based payment expenses by functional area and the impact of the transformation program Share-Based Payment SAP's Q1 2025 share-based payment expenses totaled €420 million, a decrease from Q1 2024, with an additional €13 million in accelerated expenses due to the transformation program Share-Based Payment Expenses | Functional Area (€ millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cost of cloud | -26 | -39 | | Cost of services | -61 | -102 | | Research and development | -136 | -212 | | Sales and marketing | -151 | -258 | | Share-based payment expenses (Total) | -420 | -688 | - In Q1 2025, SAP recognized €13 million in accelerated share-based payment expenses due to the transformation program, classified as restructuring expenses[62]