SAP(US:SAP) Zhi Tong Cai Jing·2025-10-22 23:21Core 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]