Core Insights - SAP SE reported a strong second-quarter 2025 performance with non-IFRS earnings per share of €1.50 ($1.70), a 37% increase year-over-year, although it fell short of the Zacks Consensus Estimate of $1.63 [1] - Total revenues on a non-IFRS basis reached €9.03 billion ($10.24 billion), marking a 9% year-over-year increase, but also below the Zacks Consensus Estimate of $10.37 billion [1] - The company's cloud revenue surged by 24% year-over-year, driven by robust growth in Cloud ERP Suite revenues [5][8] Financial Performance - Non-IFRS operating profit rose 32% to €2.57 billion, with a margin increase to 28.5%, attributed to improved operational efficiency and cost controls [13] - Non-IFRS gross profit increased 10% to €6.64 billion, with cloud gross profit rising 27% to €3.86 billion [12] - Free cash flow increased significantly by 83% to €2.36 billion during the quarter, indicating strong operational strength [14] Cloud Business Growth - The current cloud backlog surged 22% to €18.1 billion, a key indicator of market success [4] - Cloud revenues reached €5.13 billion, with a notable 30% growth in Cloud ERP Suite revenues [5] - The cloud and software segment accounted for 88.2% of total revenues, generating €7.97 billion, an 11% year-over-year increase [4] Strategic Initiatives - SAP's investment in AI and data platforms is yielding positive results, with the AI assistant Joule enhancing process efficiency and user productivity [2] - The "RISE with SAP" program continues to attract global organizations, indicating strong client adoption [7] - The company initiated a transformation program in January 2024, concluding in Q1 2025, aimed at enhancing operational scalability [16] Customer Engagement - Significant customer wins were reported, including partnerships with major organizations such as Accenture, BMW Group, and L'Oréal [10] - The cloud revenue growth was particularly strong in the APJ and EMEA regions, with standout performances in countries like Brazil, France, and India [11] Future Outlook - SAP reaffirmed its 2025 financial outlook, anticipating cloud revenues between €21.6-€21.9 billion, representing a year-over-year increase of 26-28% [17] - Cloud and software revenues are expected to be in the range of €33.1-€33.6 billion, with a projected increase of 11-13% year-over-year [18] - Free cash flow is estimated to reach around €8 billion, a significant rise from €4.22 billion in 2024 [19]

QQQs +13bps as Trump said last night US and Japan finally reached a deal which would impose 15% tariffs (vs previous 25% threat) on imports including autos, while Japan will invest $550B into the US and open their market to certain goods. Nikkei +4% and in Asia and Europe, autos rallied with Toyota +15%. Bessent also said yesterday US and China will hold 3rd round of trade talks next week. QQQ 指数上涨13个基点,因特朗普昨夜宣布美日最终达成 将对包括汽车在内的进口商品征收 15%关税（此前威 协议, 胁税率为 25%），同时日本将向美国投资 5500 亿美元并开 放部分商品市场。日经指数大涨 4%，亚欧汽车板块集体走 ...

Hello and welcome to Morning Brief Market Sunrise. I'm Raman Karamali live from Yahoo Finances studios in London. It's Wednesday 23rd July.Coming up on the show, the US and Japan agree a trade deal. The president labels it massive as the tariff is set at 15%. But the Detroit 3, that's Ford, General Motors, and Stalantis, aren't too thrilled.I'll explain why. And earning season continues. We'll have the latest from the likes of AT&T, Hasbro, and Hilton.So, grab your coffee and let's own the morning. Well, we ...

Group 1: Texas Instruments - Texas Instruments reported quarterly earnings of $1.41 per share, exceeding the analyst consensus estimate of $1.33 per share [1] - The company reported quarterly sales of $4.448 billion, surpassing the analyst consensus estimate of $4.329 billion [1] - Shares of Texas Instruments fell sharply by 12% to $189.15 in pre-market trading following the earnings report [2] Group 2: Other Companies - Telix Pharmaceuticals Limited shares fell 7.9% to $15.00 in pre-market trading after issuing an update on its commercial and operational performance [4] - Enphase Energy, Inc. shares decreased by 7.5% to $39.32 despite posting upbeat second-quarter earnings, as the company anticipates third-quarter revenue of $330 million to $370 million, below estimates of $363.25 million [4] - ON Semiconductor Corporation shares fell 6.3% to $58.50 in pre-market trading after a previous gain of 3% on Tuesday [4] - Microchip Technology Incorporated shares dipped 6.2% to $70.60 in pre-market trading [4] - Analog Devices, Inc. shares fell 5% to $223.78 in pre-market trading [4] - NXP Semiconductors N.V. shares declined 4.8% to $216.82 following the release of quarterly results [4] - Canadian National Railway Company shares fell 4.6% to $95.71 after downbeat quarterly results [4] - SAP SE shares decreased by 4.3% to $292.92 following second-quarter results [4]

Investment Rating - The report maintains a positive outlook for SAP, expecting cloud revenue growth of 26-28% year-on-year for 2025, with non-IFRS operating profit guidance of €10.3-10.6 billion [5][17]. Core Insights - SAP's Q2 2025 results showed total revenue of €9.03 billion, a 9% year-on-year increase, with cloud revenue reaching €5.13 billion, up 24% year-on-year, although slightly below market expectations [2][12]. - Non-IFRS operating profit was €2.57 billion, a significant 32% increase year-on-year, exceeding analyst expectations [2][13]. - Free cash flow was particularly strong at €2.36 billion, representing an 83% year-on-year increase, far surpassing market expectations [2][13]. Summary by Sections Financial Performance - Total revenue for Q2 2025 was €9.03 billion, up 9% year-on-year (12% at constant currency), slightly below the expected €9.07 billion [2][12]. - Cloud revenue reached €5.13 billion, a 24% year-on-year increase (28% at constant currency), also below the expected €5.17 billion [2][12]. - Non-IFRS operating profit was €2.57 billion, up 32% year-on-year (35% at constant currency), exceeding the expected €2.43 billion [2][13]. - Non-IFRS earnings per share were €1.50, a 37% increase year-on-year [2][13]. - Free cash flow reached €2.36 billion, an 83% increase year-on-year, significantly above the expected €1.43 billion [2][13]. Business Drivers - The strong performance of the cloud ERP suite contributed to revenue growth, with a 34% increase to €4.42 billion, maintaining over 30% growth for 14 consecutive quarters [2][13]. - Optimization of share-based compensation expenses contributed to profit growth, with a reduction of €331 million year-on-year [2][13]. - The use of Business AI products improved operational efficiency, with productivity on the digital sales platform increasing by 50% [3][14]. Market Expansion and Innovation - SAP released 14 AI agents in Q2 2025, with plans to reach 40 by year-end, enhancing various business scenarios [3][14]. - The company maintained a high closing rate among key customers in the public sector and defense, with significant new customer additions in digital supply chain and human capital management solutions [4][15]. - SAP is expanding its presence in the Chinese market through a strategic partnership with Alibaba, which will deploy SAP Business Suite and explore AI integration [4][16]. Future Outlook - SAP maintains its full-year 2025 guidance, expecting cloud revenue of €21.6-21.9 billion and non-IFRS operating profit of €10.3-10.6 billion [5][17]. - The company remains cautiously optimistic about the second half of the year, driven by advancements in Business AI and strategic partnerships [5][17].

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].

Group 1: Market Performance - The S&P 500 index closed at a new high, while the tech sector's rally paused, dragging down the Nasdaq [1] - Domestic bulk commodity markets experienced a collective surge, with six major products hitting the daily limit [1] - A-share coal stocks saw a surge, with reports of a "coal mine production inspection" notice confirmed by media [1] Group 2: Company News - Medpace's Q2 performance significantly exceeded expectations, leading to a nearly 55% surge in its stock price, positively impacting CRO concept stocks [1] - SAP, the largest weight in European stocks, reported cloud sales below expectations, raising concerns over tariffs and currency fluctuations, resulting in a 3% drop in after-hours trading [1] Group 3: Trade Agreements - Trump announced a trade agreement with Japan, setting a tariff rate of 15% [1] - Trump also stated that a trade agreement with the Philippines has been reached, imposing a 19% tariff [1] Group 4: Federal Reserve Pressure - Trump has moderated his stance on "firing Powell" while simultaneously pressuring the Federal Reserve alongside Bessenet, who stated that Powell has no reason to resign early [1]

Market Overview - Investors are awaiting earnings reports from major tech companies like Google and Tesla, while digesting tariff-related news, leading to declines in semiconductor and AI sectors, which ended the Nasdaq's seven-day rally [2] - General Motors fell over 8% due to performance decline impacted by Trump tariffs in Q2, while Texas Instruments provided a pessimistic Q3 outlook, causing its stock to drop over 11% after hours [2] - The 10-year U.S. Treasury yield fell nearly 3 basis points, and the dollar declined for three consecutive days, dropping nearly 0.5% [2] Key News - Bessent forecasts that tariff revenues could reach $2.8 trillion over the next decade, supporting Powell's continued tenure [3] - Trump announced a trade agreement with the Philippines, imposing a 19% tariff, which is lower than the previously threatened 20% [3] - The U.S. and Indonesia reached a preliminary trade agreement, allowing at least $50 billion in U.S. goods market access and easing restrictions on key mineral exports [3] - Malaysia seeks a 20% tariff but is unwilling to compromise on electric vehicle incentives and foreign ownership limits [3] - Thailand is close to a trade agreement with the U.S., potentially reducing new tariff rates to around 20% [3] Domestic Commodity Market - The domestic commodity market saw a collective surge, with six major products hitting the daily limit, driven by government signals against "involution" and expectations of supply tightening due to coal mine production inspections [12][20] - Coal stocks experienced a surge, with reports confirming the authenticity of a notice regarding coal mine production inspections [20] Company Performance - Medpace's Q2 performance exceeded expectations, with revenue and EBITDA both growing over 10% year-on-year, leading to a nearly 55% stock price increase [14] - SAP's cloud sales fell short of expectations, leading to a 3% drop in stock price post-earnings, attributed to currency fluctuations and tariff uncertainties [13] Industry Developments - OpenAI announced a partnership with Oracle to expand a 4.5GW data center, enhancing its Stargate project capacity [13] - The human-shaped robot industry is entering a competitive phase, with a focus on who can secure orders first to validate commercial value [14] - The TDI market is expected to transition from passive to active inventory replenishment due to supply tightness and seasonal demand [24]

Financial Data and Key Metrics Changes - In Q2, cloud revenue rose by 28%, marking an increase of two percentage points compared to Q1 [7][28] - Total revenue growth accelerated to 12% [8][34] - Current cloud backlog grew by 28% in Q2, reaching €18.1 billion [28][34] - Operating profit surged by 35%, reflecting improvements in the cost base due to the transformation program [9][33] - Non-IFRS operating profit increased to €2.6 billion [34] Business Line Data and Key Metrics Changes - The Cloud ERP suite continued to drive growth, achieving 34% growth in Q2, representing 86% of total cloud revenue [29][34] - Software licenses revenue decreased by 13% in Q2, aligning with the company's strategy to transition to cloud-based models [31][34] Market Data and Key Metrics Changes - Cloud revenue performance was particularly strong in the APJ and EMEA regions, with notable performances in Brazil, Chile, France, India, Italy, South Korea, and Spain [32][34] - The Americas showed solid performance, although specific figures were not disclosed [32] Company Strategy and Development Direction - The company is focusing on product innovation and increasing productivity through business AI [6][25] - SAP aims to strengthen its portfolio with data and AI innovations while maintaining cost discipline [26][35] - The partnership with Alibaba is expected to enhance market potential in China, targeting both existing and new customers [10][61] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing uncertainty in global markets but expressed confidence in the company's pipeline for the second half of the year [6][30] - The company is preparing for less favorable outcomes by focusing on elements within its control to protect its bottom line and free cash flow [31][35] - Management remains optimistic about sustaining momentum and closing the year strongly despite macroeconomic volatility [35] Other Important Information - The company released its first 14 AI agents in the first half of the year, with plans to increase this number to 40 by year-end [19][20] - The non-IFRS cloud gross margin expanded by 1.8 percentage points to 75.2% [33] Q&A Session Summary Question: Insights on operating margin and EBIT growth for the second half - Management highlighted that the strong performance in operating profit was partly due to a €331 million improvement in stock-based compensation, which is expected to have easier comparisons in the first half [42][44] Question: Long-term sustainability of margin improvements - Management expressed confidence in maintaining operating leverage ratios of 80-90% for the coming years, despite some continuous adjustments in workforce [54][56] Question: Details on the Alibaba partnership and its impact - The partnership aims to enhance SAP's presence in China, focusing on both large enterprises and the upper mid-market [61][62] Question: Impact of transformation credits on cash flow - Transformation credits are amortized over the term of the deal, and while they may create initial cash conversion challenges, they are neutral over the life of the transaction [68][70] Question: Demand impact on CCB and cloud revenue - Management noted that while there is a slight deceleration expected, the pipeline coverage remains strong, and customers are responding positively to business cases [80][100]

Financial Data and Key Metrics Changes - In Q2 2025, cloud revenue rose by 28%, an increase of two percentage points compared to Q1 2025 [8][27] - Total revenue growth accelerated to 12%, reaching €9 billion [9][33] - Operating profit surged by 35%, reflecting improvements in the cost base due to transformation programs [9][32] - Current cloud backlog grew by 28% to €18.1 billion [27][33] - Non-IFRS cloud gross margin expanded by 1.8 percentage points to 75.2% [32] Business Line Data and Key Metrics Changes - The Cloud ERP suite continued to drive growth, achieving 34% growth in Q2, representing 86% of total cloud revenue [27][32] - Software licenses revenue decreased by 13% in Q2, aligning with the company's strategy to transition customers to cloud solutions [30] Market Data and Key Metrics Changes - Cloud revenue performance was particularly strong in the APJ and EMEA regions, with notable performances in Brazil, Chile, France, India, Italy, South Korea, and Spain [31] - The US public sector and manufacturing sectors experienced elongated sales cycles due to geopolitical uncertainties [28][30] Company Strategy and Development Direction - The company is focusing on product innovation and increasing productivity through business AI [7][25] - SAP aims to strengthen its portfolio with data and AI innovations while maintaining cost discipline [25][34] - The partnership with Alibaba is expected to enhance market penetration in China, targeting both large enterprises and the upper mid-market [10][60] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing uncertainty in global markets but expressed confidence in the company's pipeline for the second half of the year [7][34] - The company is preparing for potential less favorable outcomes by focusing on elements within its control to protect its bottom line [30] - Management remains optimistic about sustaining momentum and closing the year strongly despite macroeconomic volatility [34] Other Important Information - The company has released over 100 pre-built SAP managed data products, with plans to double that by year-end [21] - The internal adoption of business AI is expected to further enhance productivity and operational efficiency [22][24] Q&A Session Summary Question: Insights on operating margin and EBIT growth for the second half of the year - Management highlighted that the strong performance in the first half was significantly influenced by a €331 million improvement in stock-based compensation, which is expected to normalize in the second half [41][42] Question: Long-term sustainability of margin improvements - Management expressed confidence in maintaining operating leverage ratios between 80% to 90% for the coming years, despite potential fluctuations in expenses [52][53] Question: Details on the Alibaba partnership and its impact - The partnership aims to leverage Alibaba's presence in China to enhance SAP's cloud offerings, targeting both multinational companies and local tech firms [60][63] Question: Impact of macroeconomic factors on demand - Management noted that elongated deal cycles are primarily due to stricter cost controls in certain industries, but emphasized that the pipeline remains strong [97][100] Question: Cash flow and transformation credits - Management explained that transformation credits are amortized over the term of deals and do not significantly impact cash conversion in the long term [66][67]