SAP Conference Call Summary - November 14, 2025 Company Overview - **Company**: SAP (NYSE: SAP) - **Industry**: Software and Cloud Services Key Points and Arguments Financial Performance and Growth - SAP experienced a strong start in Q1 2025, but faced tariff disruptions impacting Q2 and Q3, leading to a cautious outlook in September [3][4] - CCB (Cloud and Cloud-Based) growth is projected to be slightly down by year-end, influenced by the WalkMe acquisition and deal slippage [4][6] - Q3 showed strong CCB growth, with underlying performance remaining robust despite M&A impacts [7][9] - Large transactions in the pipeline could significantly affect Q4 CCB growth if closed within the year [8][12] - The institutional business in the U.S. has shown signs of recovery, with a significant deal signed with IDIQ for up to $1 billion [9][10] Cloud Revenue Insights - Cloud revenue growth is expected to be at the low end of guidance, with a 0.7% variance from initial projections [6][22] - The company emphasizes the importance of CCB growth as a more meaningful metric than cloud revenue alone [25][22] - Approximately 40% of SAP's ERP maintenance base is on the RISE journey, indicating significant potential for future cloud revenue growth [27][28] Market Position and Competitive Landscape - SAP is growing at approximately 29% in the PaaS and SaaS segments, outperforming competitors like Workday and Oracle [48] - The company is focused on maintaining a competitive edge through AI integration and enhancing customer experiences [62][67] AI and Transformation Initiatives - SAP views AI as an opportunity to enhance its offerings, with a focus on data management and integration [62][64] - The company is investing in tools to facilitate customer transitions to S/4HANA, aiming to reduce risks and costs associated with migration [36][38] - New AI-driven functionalities are being developed to improve operational efficiency and customer satisfaction [72][74] Future Outlook - SAP aims to achieve Rule of 40 status, balancing growth and profitability, with expectations for revenue growth to accelerate in 2026 and 2027 [52][51] - The company is optimistic about its long-term growth trajectory, driven by cloud conversion and new business opportunities [50][51] Challenges and Risks - The company acknowledges potential challenges in sustaining high growth rates as market conditions evolve [48][50] - There is a recognition of the need for continuous adaptation and innovation to maintain competitive advantages in a rapidly changing market [68][70] Additional Important Insights - SAP's transformation initiatives are seen as essential for long-term success, with a focus on leveraging AI and data analytics to enhance product offerings [15][36] - The company is actively recruiting talent to support its growth strategy, particularly in AI and cloud services [69][70] - SAP's historical expertise in various verticals provides a competitive advantage in developing tailored solutions for customers [67][68]

Core Insights - General Dynamics Information Technology (GDIT) has expanded its collaboration with Google Public Sector to enhance innovation for U.S. government agencies, focusing on secure AI and cloud solutions for defense, intelligence, and civilian services [1][6] Group 1: Collaboration and Technology Integration - The collaboration aims to leverage Google Distributed Cloud to provide AI and computing capabilities in remote environments where communication may be unreliable or cut off [2][4] - GDIT will integrate its Digital Accelerators portfolio with Google Cloud to expedite decision-making, enhance security, and deliver cost savings for federal agencies [3][6] Group 2: Focus Areas of Collaboration - The first focus area is the development of "mission edge AI" solutions, demonstrated during the U.S. Air Force's Exercise Mobility Guardian 2025, showcasing support for air mobility operations [4] - The second focus area involves modernizing citizen engagement services using GDIT's AI solutions and Google Cloud's Contact Center AI Platform, which has already resulted in $12 million in savings and a 40% reduction in call volume for a major federal agency [5] Group 3: Strategic Importance - This expanded partnership is part of GDIT's technology investment strategy, emphasizing collaboration with commercial technology firms to drive innovation for government agencies [6] - Google Public Sector aims to leverage its strengths in AI, cloud, and cybersecurity to support the government's digital transformation through this strategic collaboration [7] Group 4: Company Overview - General Dynamics is a global aerospace and defense company with over 110,000 employees and reported $47.7 billion in revenue for 2024 [7]

Core Viewpoint - Bitfarms (NASDAQ: BITF) shares declined 12.8% following the release of Q3 earnings, which were perceived negatively by the market despite showing strong revenue growth [1][4]. Financial Performance - Bitfarms reported Q3 revenue of $69 million, a 156% increase year over year, but the loss per share remained at $0.05, consistent with the previous quarter and an improvement from a loss of $0.07 in Q1 [3][4]. - The reported revenue and earnings missed analyst expectations, which were $85 million for revenue and a loss per share of $0.02, indicating concerns about mining margins and profitability outlook [4][7]. Strategic Shift - The company announced a strategic pivot to utilize some compute capacity for digital infrastructure projects in AI and cloud sectors, but the market response has been cautious due to ongoing investments in Bitcoin mining infrastructure and uncertainty regarding future earnings [5][6].

Core Insights - Dynatrace, Inc. has launched expanded AI-driven cloud operations capabilities for Microsoft Azure, enhancing observability features to simplify cloud management and accelerate automation across enterprise environments [1][2] Group 1: Product Features - The upgraded Azure-focused platform includes expanded telemetry, richer metadata, and tools supporting agentic and generative AI workloads [2] - New automated workflows are designed to resolve issues proactively before they impact users, utilizing intelligent diagnostics for workloads on Azure Virtual Machines and Azure Functions [3] - The platform continuously reviews cloud resource usage to enhance efficiency, aiming to support enterprise customers in managing rising cloud spending [4] Group 2: Collaboration and Integration - The integration with Microsoft's Azure SRE Agent marks Dynatrace as the first observability platform to connect with this reliability tool, combining causal AI with resource monitoring to reduce outages [6] - Microsoft emphasizes that the new integration helps Azure customers streamline performance and accelerate AI adoption, providing improved reliability and operational consistency [5] Group 3: Market Response - Following the announcement, Dynatrace shares increased by 1.87%, reaching $47.38 [7]

Core Insights - AT&T, Inc. is expanding its offerings for small businesses to meet the growing demand for digital transformation and connectivity [1][4] - The company’s innovative product suite, including 5G and fiber solutions, aligns well with the needs of small businesses [2][3] Product Offerings - AT&T's 5G standalone network provides faster speeds and lower latency, supporting advanced applications [3] - The introduction of AT&T Express Waves allows businesses to scale operations quickly, supporting cloud, AI, and edge applications [4] - AT&T's business fiber is designed for high-bandwidth applications and cloud operations, enhancing performance and reliability [3][4] Market Position and Competition - AT&T faces competition from Verizon and T-Mobile, both of which offer comprehensive solutions for small businesses [5][6] - Verizon's marketplace includes software solutions that help streamline workflows, while T-Mobile has launched new plans that include Microsoft 365 [5][6] Financial Performance - AT&T's stock has increased by 16% over the past year, outperforming the Wireless National industry's decline of 6.3% [7] - The company's shares trade at a forward P/E ratio of 11.45, lower than the industry average of 12.2 [9] - Earnings estimates for AT&T for 2025 and 2026 have seen an upward revision over the past 60 days [10]

Core Viewpoint - Cognizant has entered into a definitive agreement to acquire 3Cloud, enhancing its capabilities in enterprise AI readiness and digital transformation through advanced data and AI solutions [1][3][4] Company Overview - Cognizant is a leading technology company focused on modernizing businesses and transforming experiences for clients [9] - 3Cloud is a prominent Microsoft Azure services provider, recognized for its expertise in cloud strategy, design, implementation, and managed services [10] Acquisition Details - The acquisition will significantly expand Cognizant's Azure portfolio and deepen its expertise in AI-led business transformation [3][6] - 3Cloud has achieved a 20% organic compound annual growth since 2020, with expectations of similar growth in 2025 due to strong demand for Azure services [3] - The deal is expected to close in the first quarter of 2026, pending regulatory approvals [9] Strategic Implications - The integration of 3Cloud's capabilities will create one of the largest global partners to Microsoft in terms of Azure Consumption Revenue [6] - Cognizant aims to empower organizations to rapidly build, deploy, and scale AI solutions, enhancing its end-to-end ecosystem for AI innovation [4][6] - The combined entity will have over 21,000 Azure-certified specialists, positioning it as a highly credentialed partner in the Azure ecosystem [6][8] Market Position - 3Cloud serves a diverse enterprise-scale client base across various sectors, including banking, healthcare, technology, and consumer services [3] - Both companies have received multiple awards from Microsoft, underscoring their leadership and excellence in delivering Azure solutions [8]

Market Overview - The equity markets experienced an upward rally in Q3 2025, with the S&P 500 Index increasing by 8.12% [1] - Improved economic conditions, strong corporate earnings, and anticipation of monetary easing contributed to the market's strong performance [1] Fund Performance - The Class A shares of the Alger Mid Cap Growth Fund outperformed the Russell Midcap Growth Index during the quarter [1] - The fund's investor letter provides insights into its top-performing and underperforming stocks [1] Astera Labs, Inc. Overview - Astera Labs, Inc. specializes in manufacturing semiconductor-based connectivity solutions for cloud and AI infrastructure [2] - The stock had a one-month return of -3.52% but appreciated by 78.31% over the past 52 weeks, closing at $157.79 per share with a market capitalization of $26.651 billion on November 12, 2025 [2] Astera Labs, Inc. Performance Insights - Astera Labs' products help large-scale computing systems move data quickly and efficiently, reducing bottlenecks in data flow [3] - The company's Intelligent Connectivity Platform combines specialized hardware with COSMOS software, providing flexible and cost-effective solutions [3] - Astera is positioned well in fast-growing markets like AI and cloud computing, supported by strong partnerships with leading technology providers [3] - The company reported better-than-expected fiscal Q2 results and raised revenue guidance for the next quarter, contributing positively to its stock performance [3] - Near-term growth is driven by the P-series switches, with management expressing confidence in the upcoming X-series switches as a potential major revenue contributor starting in 2026 [3]

Environmental Impact - Data centers, essential for cloud computing, consume energy equivalent to a small city [1] - The physical infrastructure of the cloud, including servers and cables, requires significant energy for cooling [1]

Core Viewpoint - Western Digital (WDC) is gaining investor attention due to a price target increase by Loop Capital, reflecting a positive outlook on HDD demand and pricing [1][2]. Company Overview - Western Digital, founded in 1970, is a leading producer of hard disk drives (HDDs), SSDs, and NAND flash memory, focusing on consumer electronics, enterprises, and cloud platforms [4]. - The company has a market capitalization of $58 billion and aims to develop scalable storage technology for hyperscalers and cloud providers, with an emphasis on innovations for AI-driven data workloads [5]. Market Performance - WDC shares have experienced significant growth on Wall Street, driven by rising demand for HDDs due to the expansion of cloud computing and AI workloads [6]. - The stock climbed nearly 7% on November 10 after Loop Capital raised its price target from $190 to $250, indicating strong investor confidence [1]. Demand and Pricing Trends - Loop Capital's analysis suggests at least a 10% increase in HDD capacity demand compared to previous estimates for 2026, which is expected to benefit Western Digital [1]. - The firm anticipates higher average selling prices for larger-capacity drives, describing this trend as "materially accretive" to the company's financials [2].

Core Viewpoint - Drax Group Plc shares have surged due to investor optimism that UK utilities could benefit from the expanding data center industry in the UK [1][2]. Company Summary - Drax's stock increased by as much as 8.5% following RWE AG's announcement of a €225 million ($261 million) gain from a UK data center project, highlighting the potential value of converting former power sites into data hubs [2]. - Barclays analysts estimate that Drax's 250-acre site, which has existing grid connections, could be valued at up to £500 million if developed for data hosting [3]. - Drax plans to build a 100-megawatt data center at its biomass power station by 2030, which could diversify its revenue streams as demand for digital power rises [6]. Industry Summary - Data centers are rapidly increasing global power demand, with the UK grid struggling to keep up; they now account for over half of new grid connection requests and could consume electricity equivalent to one-third of Britain's peak demand [4]. - Redeveloping existing industrial or power generation sites into data centers is a practical solution to grid congestion, making such properties increasingly valuable and scarce [4]. - RWE's project was valued at approximately €1 million per megawatt of grid capacity, with similar valuations expected across Europe [5].