SAP's 2026 cloud forecasts disappoint, shares drop 15%, biggest daily loss since 2020

Core Viewpoint - SAP's 2026 cloud revenue forecast fell short of market expectations, leading to a significant decline in its share price and raising concerns about the broader software sector's performance [10][11]. Group 1: Share Price Impact - SAP shares dropped as much as 17%, reaching their lowest point since February 2024, resulting in a loss of over 40 billion euros in market capitalization [10][11]. - The decline in SAP shares negatively affected Frankfurt's benchmark index, despite generally positive conditions in European markets [10]. - Other European software stocks also experienced declines, with Dassault Systemes down 2.7% and Sage falling over 3% [10]. Group 2: U.S. Software Sector Reaction - U.S. software stocks were similarly impacted, with Salesforce down 6.3%, Adobe down 2.5%, and Datadog down about 5% [2][11]. - ServiceNow's shares plunged 9% despite a positive forecast, indicating a broader trend of investor caution in the software sector [2][11]. Group 3: Revenue and Backlog Insights - SAP expects cloud revenue growth of 23% to 25% in 2026, a deceleration from the 25% growth seen in 2025 [6][11]. - The total cloud backlog grew by 30% to 77.3 billion euros, with full-year cloud revenue reaching 21 billion euros, a 26% increase at constant currencies [9][11]. - SAP's CFO highlighted a larger-than-anticipated slowdown due to customers shifting to larger projects and increased demand for sovereign cloud solutions, which have longer sales cycles [7][11]. Group 4: Market Sentiment and Analyst Commentary - Analysts noted a general distrust in the software market, with investors shifting focus to semiconductors, indicating a challenging environment for software companies [8][11]. - JPMorgan pointed out that the market reaction was driven by concerns over cloud backlog and revenue growth, which are critical for investor confidence [7][11]. - Oddo BHF analyst emphasized that even minor misses in expectations could lead to significant market repercussions in the current context [8][11]. Group 5: Strategic Developments - SAP announced a two-year buyback program worth up to 10 billion euros, aiming to bolster investor confidence [9][11]. - The company has been actively transitioning legacy database customers to cloud solutions while executing a 3.2 billion euro restructuring program [10][11]. - Major customer wins in Q4 included contracts with Dexco, Lockheed Martin, and Rolls-Royce, showcasing SAP's ongoing efforts to expand its market presence [10][11].