Europe's most valuable firm SAP flags U.S. trade slowdown but says Japan deal gives 'hope'

Core Viewpoint - SAP is experiencing a slowdown in customer decision-making due to U.S. tariff tensions, but the recent trade deal with Japan offers cautious optimism for future growth [1][4]. Group 1: Financial Performance - SAP reported a 9% year-on-year revenue increase to €9.03 billion ($10.6 billion) in Q2, slightly below the consensus forecast of €9.08 billion [9]. - Operating profit was €2.57 billion, just ahead of estimates [9]. - The company's cloud backlog increased by 28% on a constant currency basis to €18.05 billion, indicating strong demand for its cloud services [10]. Group 2: Market Environment - The uncertainty in the market has led to delays in large transactions, particularly in the public sector and among large manufacturing companies with complex supply chains [2][4]. - The recent trade agreement with Japan, which sets tariffs on its exports to the U.S. at 15%, has provided some hope for improved market conditions [7]. Group 3: Strategic Focus - SAP has shifted its business focus towards cloud computing and artificial intelligence, which has contributed to its status as Europe's largest listed company by market capitalization [5][6]. - The company is leveraging AI to enhance efficiencies in finance, sales, and supply chain data for its clients [6]. Group 4: Analyst Reactions - Deutsche Bank analysts view SAP's performance positively, citing strong product offerings and a solid AI roadmap, while also noting new customer acquisitions like Alibaba [10]. - Conversely, analysts from TD Cowen and Piper Sandler have lowered their target prices for SAP's stock, reflecting mixed sentiments in the market [11]. Group 5: Currency Impact - Fluctuations in foreign exchange rates, particularly the weakness of the U.S. dollar against the euro, are expected to negatively impact cloud revenue growth by 5 percentage points in Q3 [12].