SAP(US:SAP)2025-07-25 10:01AI and Product Strategy - SAP's product strategy focuses on an AI-First and Suite-First approach, integrating applications, data, and AI to enhance business processes and drive growth[7] - In the first half of 2025, SAP launched 14 AI agents and over 100 pre-built data products for the SAP Business Data Cloud, with expectations to reach 40 AI agents and double the data products by the end of 2025[9] - SAP's innovation efforts include the SAP Business Data Cloud, which accelerates data readiness for AI and simplifies enterprise intelligence deployment at scale[30] - SAP's commitment to AI-powered business outcomes was reinforced with the launch of new generative AI features at Sapphire 2025, highlighting its focus on connecting data, intelligence, and outcomes[31] - SAP's partnerships with Accenture, Perplexity, Palantir, and Alibaba Group aim to enhance AI capabilities, cloud transformation, and connected intelligence across enterprises[15] Financial Performance - Total revenue for the first half of 2025 increased by 10% to €18,040 million compared to €16,329 million in the first half of 2024[39] - Cloud revenue grew by 25% to €10,124 million, driven by strong performance in the Cloud ERP Suite, which saw a 32% increase[39][48] - Operating profit surged to €4,789 million, an increase of over 100% from €434 million in the first half of 2024[43] - Profit after tax rose to €3,545 million, compared to €94 million in the first half of 2024, marking a significant increase[44] - Basic earnings per share increased to €2.98, up from €0.05 in the first half of 2024[45] - Free cash flow increased by 51% to €5,939 million, with a free cash flow margin of 33%[55] - The effective tax rate (IFRS) improved to 28.7%, down from 76.9% in the first half of 2024[46] - Segment profit for Applications, Technology & Support increased by 30% to €6,456 million, driven by cloud revenue growth[51] Economic and Market Conditions - The global economic activity showed moderate decline in the first half of 2025, influenced by trade conflicts and increased tariffs, impacting domestic consumption and export competitiveness[24] - SAP's portfolio strategy is designed to support business resilience and agility amid macroeconomic challenges, including inflationary pressures and trade imbalances[29] Cash Flow and Liquidity - As of June 30, 2025, SAP reported net liquidity of €2,297 million, an increase of 60% from €1,695 million on December 31, 2024[59] - The company anticipates free cash flow of approximately €8.0 billion for 2025, up from €4.22 billion in 2024, driven by lower restructuring and compliance payments[85] - The company reported net cash flows from operating activities of €6,357 million in Q1–Q2 2025, an increase of 44.9% from €4,388 million in Q1–Q2 2024[119] Employee and Corporate Culture - The Business Health Culture Index (BHCI) was introduced to replace the Women in Executive Roles measure, capturing employee experience across key themes and promoting a healthy work environment[23] - The Employee Engagement Index improved to 78%, an increase of 2 percentage points from 76% in November 2024[109] - SAP's turnover rate was 8.2%, slightly up from 7.3% at the end of the first half of 2024[109] - SAP's total employee headcount as of June 30, 2025, was 108,929, an increase from 105,315 in June 2024[137] Future Projections - SAP's cloud revenue for 2025 is projected to be between €21.6 billion and €21.9 billion, representing a growth of 26% to 28% at constant currencies compared to €17.14 billion in 2024[77] - Total revenue growth is expected to accelerate through 2027, primarily due to growth in cloud revenue and the Cloud ERP Suite[82] Changes in Financial Measures - Changes in financial measures starting 2025 include the inclusion of proceeds from sales of intangible assets in free cash flow calculations, reflecting a more accurate evaluation of cash flow generated by operating activities[20] - The company expects an effective tax rate (non-IFRS) of approximately 32% for 2025, consistent with 2024[82] Shareholder Returns - The company paid dividends of €2,743 million in Q1–Q2 2025, compared to €2,565 million in Q1–Q2 2024, an increase of 7%[119] - The company repurchased 24,743,442 shares at an average price of €185.51, totaling approximately €4.6 billion under the share repurchase program as of June 30, 2025[171]