Core Insights - SAP SE reported a fourth-quarter 2025 non-IFRS earnings per share (EPS) of €1.62, reflecting a 16% increase year-over-year [1][9] - The company experienced strong cloud bookings and profitability, with total revenues on a non-IFRS basis reaching €9.68 billion, a 3% increase year-over-year (9% at constant currency) [2][3] - Despite positive revenue growth, SAP's shares fell 18% in pre-market trading due to cloud backlog and 2026 revenue guidance not meeting investor expectations [3][9] Financial Performance - For 2025, total revenue was €36.8 billion, up 8% (11% at constant currency), with predictable revenue increasing to 86% [3] - The cloud backlog surged 16% (25% at constant currency) to €21.05 billion, indicating strong market demand [4] - Non-IFRS gross profit was €7.2 billion, a 3% increase year-over-year, while non-IFRS cloud gross profit rose 21% to €4.18 billion [11] Cloud Business Highlights - Cloud revenues reached €5.61 billion, up 19% year-over-year (26% at constant currency), driven by a 23% growth in Cloud ERP Suite revenues [5] - SAP Business AI played a significant role, being included in two-thirds of cloud order entries, highlighting its importance in deal conversion [2][9] - The company secured significant customer wins across various sectors, including notable clients like Bank of Italy and Deutsche Bundesbank [8] Client Adoption and Solutions - The "Rise with SAP" solution was adopted by numerous clients, including major brands like adidas and H&M Group [6] - SAP's "GROW with SAP" initiative aimed at smaller businesses was implemented by several organizations, enhancing cloud ERP adoption [7] Future Outlook - For 2026, SAP projects cloud revenue between €25.8 billion and €26.2 billion, indicating a growth of 23% to 25% from 2025 [15] - Non-IFRS operating profit is expected to be between €11.9 billion and €12.3 billion, representing a growth of 14% to 18% [16] - The company anticipates a moderation in current cloud backlog growth in 2026 compared to 2025 [16]

Financial Performance - The total cloud backlog reached EUR 77 billion, up 30% year-on-year, indicating strong underlying business momentum [7][14][26] - Cloud revenue grew 26% year-on-year, primarily driven by the strong performance of the Cloud ERP Suite, which increased by 32% [27][29] - Total revenue for the full year approached EUR 37 billion, up 11% [29] Business Lines and Key Metrics - The Cloud ERP Suite accounted for 86% of total cloud revenue, highlighting its significance as a growth engine [27] - The number of customers using the AI copilot tool grew ninefold over the year, with 60% of existing cloud customers actively using SAP's AI offerings [6][54] Market Performance - Strong performances were noted in Brazil, France, Germany, India, Italy, South Korea, and Spain, while China, Japan, Saudi Arabia, the UK, and the US also showed significant strength [28] - The company outperformed the cloud market by 10 percentage points in 2025 [15] Company Strategy and Industry Competition - The ongoing transformation of SAP's operating model, combined with AI integration, has positioned the company to capitalize on business AI opportunities [8][20] - The company is focused on a Partner-First approach for mid-market growth and expanding its sovereign cloud capabilities [12][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged geopolitical uncertainties and macroeconomic volatility but expressed confidence in the company's ability to drive growth through AI and cloud solutions [4][23] - The company expects a record free cash flow of approximately EUR 10 billion in 2026, supported by operational efficiency improvements [32] Other Important Information - The non-IFRS cloud gross margin for the full year expanded by 1.6 percentage points to 75%, driving cloud gross profit up by 29% [28] - A new two-year share repurchase program of up to EUR 10 billion is set to start in February, reflecting confidence in the business's sustainable strengths [30] Q&A Session Summary Question: Concerns about CCB growth and deal slippage - Management noted that the 25% CCB growth was impacted by a higher share of large deals with longer ramp periods and some government deals with termination clauses [38][40] Question: AI-driven cost efficiencies - The company aims to achieve EUR 2 billion in cost efficiencies through business growth without a restructuring plan, focusing on scaling operations with AI [44][46] Question: Customer adoption of AI offerings - Approximately 60% of existing cloud customers are actively using SAP's AI, with a significant increase in adoption noted [54][56] Question: Future cloud revenue growth trajectory - Management indicated that while some deceleration is expected, it will be less than in 2025, with a strong pipeline for 2026 [66][68]

Financial Data and Key Metrics Changes - The total cloud backlog reached EUR 77 billion, up 30% year-on-year, indicating strong underlying business momentum [6][25] - Cloud revenue grew by 26% year-on-year, primarily driven by the strong performance of the Cloud ERP Suite, which increased by 32% [27] - Total revenue for the full year approached EUR 37 billion, up 11% [27] Business Line Data and Key Metrics Changes - More than two-thirds of Q4 cloud order entry included business AI, which increased by over 20 percentage points compared to Q3 [5] - The Cloud ERP Suite accounted for 86% of total cloud revenue for the year, reinforcing its position as a key growth engine [27] - Software licenses revenue decreased by 27%, contrasting with the growth in cloud revenue [27] Market Data and Key Metrics Changes - Brazil, France, Germany, India, Italy, South Korea, and Spain showed outstanding performances in cloud revenue, while China, Japan, Saudi Arabia, the UK, and the US were particularly strong [28] - The company outperformed the cloud market by 10 percentage points in 2025 [15] Company Strategy and Development Direction - The company is focused on leveraging AI to enhance business resilience and productivity, with a clear strategy to embed AI into business processes [4][5] - The RISE and GROW with SAP initiatives remain core pillars of the transformation strategy, targeting large-scale enterprises and mid-sized companies [24] - The company aims to achieve a run rate of around EUR 2 billion in real cost efficiencies by the end of 2028 through internal AI usage [21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged geopolitical uncertainty and macroeconomic volatility as challenges but expressed confidence in the company's ability to drive growth through AI and cloud solutions [4][24] - The outlook for 2026 anticipates a moderation in CCB growth but expects total revenue growth to accelerate, supported by a strong foundation [32] Other Important Information - The company plans to initiate a new two-year share repurchase program of up to EUR 10 billion, reflecting confidence in sustainable business strengths [31] - Non-IFRS basic earnings per share increased by 36% to EUR 6.15 for the fiscal year 2025 [31] Q&A Session Summary Question: Concerns about CCB growth and pipeline for Q1 - Management noted that the 25% CCB growth was impacted by a higher share of large deals with longer ramp periods and some deals with cancellation clauses, but bookings performance was ahead of plan [40][41] Question: AI-driven cost savings and R&D focus - The company plans to achieve EUR 2 billion in savings through business growth without a restructuring plan, focusing on scaling the business with AI [47][49] Question: Customer adoption of AI offerings - Approximately 60% of existing cloud customers are actively using the AI offerings, with a significant increase in adoption of the AI copilot tool [57] Question: TCB growth dynamics and BDC contribution - Management acknowledged a steep deceleration in TCB growth but emphasized the strong pipeline and expected contributions from the Business Data Cloud in 2026 [74]

Core Insights - SAP SE reported third-quarter 2025 non-IFRS earnings of €1.59 ($1.86) per share, a 29% increase year-over-year, although below the Zacks Consensus Estimate of $1.69 [1] - Total revenues on a non-IFRS basis reached €9.08 billion ($10.6 billion), marking a 7% year-over-year increase (11% at constant currency), slightly above the Zacks Consensus Estimate of $10.56 billion [1][2] Revenue Growth and Cloud Strategy - The cloud backlog surged 23% (27% at constant currency) to €18.8 billion, indicating strong market demand [3] - The Cloud and software segment, which constitutes 88.3% of total revenues, generated €8.02 billion, an 8% year-over-year increase (12% at constant currency) [3] - Cloud revenues reached €5.29 billion, up 22% year-over-year (27% at constant currency), driven by a 26% growth in Cloud ERP Suite revenues [4] Client Adoption and Market Expansion - The "RISE with SAP" program saw significant adoption among global organizations, including notable clients like Alphabet and Nestlé [5][6] - Major customer wins included engagements from brands such as BMW, Volkswagen Mexico, and Panasonic, showcasing SAP's expanding clientele [7] Financial Performance and Margins - Non-IFRS gross profit increased 7% year-over-year to €6.7 billion, with cloud gross profit rising 24% to €3.97 billion [10] - Non-IFRS operating profit rose 14% to €2.57 billion, with an operating margin of 28.3% [10] Cash Flow and Share Repurchase - As of September 30, 2025, SAP's cash and cash equivalents stood at €9.9 billion, up from €7.94 billion in June [11] - The company generated operating cash of €1.5 billion, a 7% increase year-over-year, and free cash flow rose 5% to €1.27 billion [11][12] Updated Financial Outlook - SAP revised its full-year 2025 guidance, expecting cloud revenue to be near the low end of €21.6–€21.9 billion, reflecting a 26–28% increase from 2024 [14] - The company anticipates non-IFRS operating profit near the high end of €10.3–€10.6 billion, up 26–30% from 2024 [15]

Core Insights - SAP SE has launched an expanded cloud strategy focusing on digital sovereignty and AI-driven innovation in Europe, addressing regulatory requirements and data protection needs [1][5][10] - The SAP Sovereign Cloud offers flexible deployment options tailored to customer requirements, enabling organizations to innovate securely while maintaining control over their digital assets [2][4][10] Investment Commitment - SAP is committing €20 billion to enhance Europe's digital resilience through secure and regulation-compliant cloud solutions, particularly for the public sector and regulated industries [5][10] Cloud Infrastructure and Offerings - The SAP Cloud Infrastructure (Europe) operates within EU data centers, ensuring compliance with local regulations, while the SAP Sovereign Cloud On-Site provides infrastructure within customer-selected data centers [3][6] - Delos Cloud is specifically designed for the German public sector, facilitating digital transformation while adhering to national sovereignty requirements [4] Financial Performance - SAP's cloud backlog increased by 22% to €18.1 billion, with cloud revenues rising 24% to €5.13 billion, driven by a 30% increase in Cloud ERP Suite revenues to €4.42 billion [8][10] - The company maintains its 2025 outlook, projecting cloud revenues of €21.6–€21.9 billion, reflecting a growth rate of 26–28% at constant currency [8] Growth Strategy - SAP's growth strategy is built on four pillars: product innovation, go-to-market transformation, simplification, and talent investment, aiming for sustained growth through 2027 [9] - The SAP Business Data Cloud is emerging as a core platform, integrating enterprise data to enhance AI-driven operations [11]