SAP Gears Up to Report Q3 Earnings: Is a Beat in the Offing?

Core Insights - SAP SE is set to release its third-quarter 2025 results on October 22, with earnings expected to be $1.69 per share, reflecting a 25.2% increase year-over-year, and revenues projected at $10.6 billion, indicating a 13.5% rise from the previous year [1] Financial Performance - SAP has consistently surpassed the Zacks Consensus Estimate for earnings in the last four quarters, achieving an average earnings beat of 7%. The company's shares have increased by 18.9% over the past year, compared to a 20.6% growth in the Computers - Software industry [2] Growth Drivers - The anticipated strong performance in the third quarter is attributed to the growth of SAP's Cloud ERP business and effective expense management. The Rise with SAP and Grow with SAP initiatives have significantly contributed to a 24% increase in cloud revenue on a non-IFRS basis, with the Cloud ERP Suite growing over 30% for 14 consecutive quarters [3][9] - Operating profit surged by 32%, driven by improved cost management and productivity enhancements [3] Strategic Focus - SAP's growth strategy is built on four pillars: product innovation, go-to-market transformation, simplification, and talent development. The company is leveraging AI to transform business processes and enhance operational efficiency, aiming for sustained growth through 2027 [4] - The SAP Business Data Cloud is designed to unify enterprise data and support AI applications with reliable information [4] AI Integration - Management expects accelerated adoption of Business AI, having launched 14 AI agents in the first half of 2025, with plans to expand to 40 agents by year-end. Internally, SAP utilizes AI to enhance productivity, which supports strong operating profit growth [5] - The AI co-pilot Joule has integrated over 1,300 skills and covers 80% of business and analytical transactions as of the end of 2024. Starting from the third quarter, Joule is accessible across both SAP and non-SAP systems [5] Financial Health - SAP's robust cash flow enables investments in innovation, acquisitions, and business growth while maintaining dividends. The company has solid free cash flow and reserves to sustain a dividend of $0.30 in the near term [6] Market Outlook - Despite a strong performance, SAP remains cautious about the macroeconomic environment, particularly regarding geopolitical developments and trade policy uncertainties that may affect sales cycles in the U.S. public sector and manufacturing [7][10]