Summary of SAP 2025 Conference Call Company Overview - **Company**: SAP (NYSE: SAP) - **Event**: 2025 Conference held on December 03, 2025 Key Industry Insights - **Cloud Transition**: SAP is focusing on its cloud journey, with a significant portion of its customers transitioning to cloud-based solutions. The company has EUR 11 billion in maintenance left to convert to cloud services [6][24]. - **AI Integration**: AI is seen as a critical component of SAP's strategy, not merely as a tool for cloud adoption but as a core part of its future business model. AI is embedded in business processes to enhance value for customers [9][10][11]. Core Points and Arguments - **Customer Acceptance**: Customers have largely accepted the transition of mission-critical systems, such as ERP, to the cloud, with many opting for additional services like Business Technology Platform (BTP) and AI solutions during the initial transition [5][6]. - **AI as a Business Driver**: AI is positioned as a foundational element of SAP's offerings, with a focus on deeply embedding AI into business processes rather than treating it as an add-on [9][10]. - **Supply Chain Focus**: There is a strong emphasis on supply chain optimization, with AI providing a significant return on investment (30%) in this area. SAP's extensive business network is leveraged to enhance supply chain planning and responsiveness [16][18]. - **Agentic AI Strategy**: SAP is developing agentic AI capabilities that are tailored to specific business functions, allowing for both standard and customizable solutions [13][23]. - **Monetization Strategy**: SAP's monetization approach for AI includes a hybrid model combining consumption-based and per-user pricing, providing flexibility and predictability for customers [27][28][30]. Additional Important Insights - **Market Positioning**: SAP is well-positioned to capitalize on AI adoption due to its unique expertise and the integration of AI with its existing applications and data platforms [15][49]. - **Mid-Market Opportunities**: SAP is actively targeting the mid-market segment, which represents a significant growth opportunity, as it currently captures only 30% of its total addressable market (TAM) in this area [66]. - **Partnerships and Ecosystem**: SAP is enhancing its partner ecosystem to support mid-market growth, enabling partners to handle sales, presales, and implementation autonomously [67]. - **Future Risks**: The primary risk identified is the installed base of customers that may delay cloud adoption. SAP is focused on accelerating migration to the cloud to mitigate this risk [68][69]. Conclusion SAP is strategically positioned to leverage its cloud and AI capabilities to drive future growth, particularly in supply chain optimization and mid-market expansion. The company's focus on embedding AI into its core offerings and enhancing customer experiences through flexible pricing models is expected to strengthen its market position in the coming years.

Summary of SAP 2025 Conference Call Company Overview - **Company**: SAP (NYSE: SAP) - **Event**: 2025 Conference Call - **Date**: December 03, 2025 Key Industry Insights - **AI Integration**: SAP emphasizes the importance of integrating application data and AI to create a seamless experience for customers, enhancing productivity and efficiency across various business functions [4][6][10] - **Business Transformation**: The company is focused on transforming business applications with AI, aiming to improve user efficiency and enable autonomous execution of tasks [12][13][15] - **Competitive Landscape**: SAP believes that best-of-breed players will struggle in the future as customers prefer integrated solutions that provide comprehensive end-to-end business processes [23][43] Core Company Strategies - **Application Data and AI Flywheel**: SAP's strategy revolves around creating a harmonized application data and AI layer that maximizes value for customers by eliminating silos [4][6][24] - **AI Assistant and Autonomous Execution**: The introduction of AI assistants aims to enhance user productivity, leading to autonomous execution of tasks as trust in AI grows [12][13][15] - **Business Technology Platform**: SAP's Business Technology Platform allows integration with non-SAP applications and the development of custom solutions, enhancing flexibility for customers [9][10] Financial Metrics and Growth - **Cloud Customer Base**: SAP has over 34,000 cloud customers utilizing SAP Business AI, with 400 premium AI use cases and 40 Joule agents deployed [30][31] - **Revenue Potential**: The peak support revenue was EUR 11.9 billion in 2022, with a significant runway for ERP cloud conversion expected to generate additional revenue [49][50] Product Development and Innovation - **Business Data Cloud**: Launched for general availability in April, this product has seen strong traction and is positioned as a SaaS service that simplifies data management and governance [52][56] - **Agent Builder**: This tool allows customers to create their own agents, enhancing customization and adaptability in their operations [33] Customer Engagement and Business Model - **Outcome-Based Licensing**: SAP is shifting towards an outcome-based business model, which resonates well with customers as it focuses on value realization rather than user count [25][26][28] - **Upsell Opportunities**: The transition to cloud ERP is expected to lead to significant upsell opportunities in related products like Business Technology Platform and Business Data Cloud [60][61] Competitive Positioning - **Differentiation from Competitors**: SAP differentiates itself from competitors like Oracle by focusing on end-to-end cloud applications and business processes rather than infrastructure [41][42] - **Partnerships and Collaborations**: Strategic partnerships with companies like Databricks and Snowflake enhance SAP's data capabilities and provide customers with more options [54][68] Conclusion - SAP is strategically positioned to leverage AI and integrated solutions to enhance customer value, streamline operations, and maintain a competitive edge in the evolving software landscape. The focus on outcome-based models and comprehensive product offerings is expected to drive future growth and customer satisfaction [24][25][28][60]

Core Insights - SAP is enhancing its development process by integrating AI capabilities into its SAP Build solution, aiming to empower developers to achieve faster and more impactful results [1][2] - The company has committed to equipping 12 million people globally with AI-ready skills by 2030, reflecting its focus on workforce development in the AI era [1][11] Developer Ecosystem - SAP Build now offers developers greater freedom to build, extend, and automate applications using familiar tools, enhancing the overall development experience [2] - New integrations with popular development solutions like Visual Studio Code and n8n will allow developers to utilize SAP Build capabilities seamlessly [3][6] Data Utilization - SAP Business Data Cloud is expanding its connectivity with various data and AI platforms, including a new partnership with Snowflake, which enhances data governance and interoperability [6] - Developers can now create data products from raw data, facilitating analytics and application development [7] - The SAP HANA Cloud knowledge graph engine can automatically generate knowledge graphs, providing insights into data relationships and business relevance [8] AI Advancements - SAP introduced its first enterprise relational foundation model, SAP-RPT-1, which predicts business outcomes, enhancing decision-making capabilities [9][10] - New AI assistants in Joule are designed to coordinate workflows across various departments, improving automation and operational efficiency [11]

Financial Data and Key Metrics Changes - In Q3 2025, cloud revenue rose by 27%, maintaining over 25% growth for five consecutive quarters, with a solid cloud gross margin of approximately 75% [6][22] - Total revenue increased by 11% to EUR 9.1 billion, with the share of predictable revenue rising by 2 percentage points to 87% [7][22] - Current cloud backlog increased by 27% to exceed EUR 18.8 billion [22] - Free cash flow increased by 5% to EUR 1.3 billion, while operating profit rose by 19% to EUR 2.6 billion [7][24] Business Line Data and Key Metrics Changes - The cloud ERP suite achieved its 15th consecutive quarter of growth exceeding 30%, representing 87% of cloud revenues and over 100% of the year-over-year increase in cloud revenues [20][22] - Software licenses revenue decreased by 42% in Q3 [23] Market Data and Key Metrics Changes - Cloud revenue performance was particularly strong in the APJ and EMEA regions, with Brazil, France, Germany, India, Italy, and South Korea showing outstanding performance [23] - The U.S. public sector business is starting to pick up again, with a major framework contract awarded to SAP by the U.S. Army [10][23] Company Strategy and Development Direction - The company aims to accelerate total revenue growth through 2027, leveraging AI as a key enabler for growth [5][19] - SAP's strategy focuses on providing software and cloud solutions without building infrastructure, partnering with cloud infrastructure providers instead [11][66] - The company is enhancing its AI capabilities by integrating AI into business processes and developing AI agents to automate and optimize operations [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the Q4 pipeline, noting that many stalled deals are now progressing, particularly in the U.S. public sector and manufacturing [32][34] - The company anticipates reaching the lower end of its cloud revenue outlook for fiscal year 2025 due to delayed bookings but expects to exceed previous targets for free cash flow [26][25] Other Important Information - SAP closed its acquisition of SmartRecruiters, enhancing its capabilities in talent acquisition [22] - The company is focusing on high-value AI use cases, emphasizing the importance of combining large language models with business processes and contextual data [12][49] Q&A Session Summary Question: Update on demand backdrop and backlog - Management noted positive early signs in the U.S. public sector and manufacturing, with a strong Q4 pipeline [32][34] Question: Delay in backlog and cloud revenue expectations - Management expressed confidence in achieving a good Q4 and picking up stalled pipeline deals [36][54] Question: Uptake of SAP ERP transition option - Management indicated positive momentum in the pipeline, with high interest in the transition option [40][41] Question: Competitive position versus Oracle - Management emphasized the strength of SAP's software and cloud offerings, stating that their strategy is proven and effective [62][66] Question: Free cash flow guidance - Management highlighted that Q4 cash flow may be impacted by tax payments and working capital fluctuations, but remains confident in achieving the target [58][59]

Core Viewpoint - SAP SE is positioned as a leader in enterprise application software, with strong growth anticipated in its upcoming earnings report due to increased demand for Cloud ERP solutions and AI integration [1][2][6] Financial Performance - The upcoming earnings announcement is expected to show an EPS of $1.69, representing a 25.2% increase year-over-year, and revenue projected at $10.6 billion, a 13.5% rise from the previous year [2] - SAP has consistently exceeded earnings expectations over the last four quarters, with an average earnings beat of 7% [4] Strategic Initiatives - Strategic initiatives like "Rise with SAP" and "Grow with SAP" have contributed to a 24% increase in cloud revenue during the second quarter [3] - The integration of AI through Joule and the introduction of 14 new AI agents have enhanced productivity and profit growth [3] Market Position - SAP's stock has increased by 18.9% over the past year, slightly below the Computers - Software industry's growth of 20.6% [3] - The company faces competition from Oracle and Microsoft in the enterprise software market [1] Financial Health - SAP's financial metrics include a P/E ratio of approximately 42.75 and a price-to-sales ratio of about 7.85, indicating strong investor confidence [4] - The debt-to-equity ratio stands at 0.21, reflecting a low level of debt compared to equity, while the current ratio of approximately 1.03 suggests a healthy ability to meet short-term obligations [5][6]

Core Insights - SAP SE is set to release its third-quarter 2025 results on October 22, with earnings expected to be $1.69 per share, reflecting a 25.2% increase year-over-year, and revenues projected at $10.6 billion, indicating a 13.5% rise from the previous year [1] Financial Performance - SAP has consistently surpassed the Zacks Consensus Estimate for earnings in the last four quarters, achieving an average earnings beat of 7%. The company's shares have increased by 18.9% over the past year, compared to a 20.6% growth in the Computers - Software industry [2] Growth Drivers - The anticipated strong performance in the third quarter is attributed to the growth of SAP's Cloud ERP business and effective expense management. The Rise with SAP and Grow with SAP initiatives have significantly contributed to a 24% increase in cloud revenue on a non-IFRS basis, with the Cloud ERP Suite growing over 30% for 14 consecutive quarters [3][9] - Operating profit surged by 32%, driven by improved cost management and productivity enhancements [3] Strategic Focus - SAP's growth strategy is built on four pillars: product innovation, go-to-market transformation, simplification, and talent development. The company is leveraging AI to transform business processes and enhance operational efficiency, aiming for sustained growth through 2027 [4] - The SAP Business Data Cloud is designed to unify enterprise data and support AI applications with reliable information [4] AI Integration - Management expects accelerated adoption of Business AI, having launched 14 AI agents in the first half of 2025, with plans to expand to 40 agents by year-end. Internally, SAP utilizes AI to enhance productivity, which supports strong operating profit growth [5] - The AI co-pilot Joule has integrated over 1,300 skills and covers 80% of business and analytical transactions as of the end of 2024. Starting from the third quarter, Joule is accessible across both SAP and non-SAP systems [5] Financial Health - SAP's robust cash flow enables investments in innovation, acquisitions, and business growth while maintaining dividends. The company has solid free cash flow and reserves to sustain a dividend of $0.30 in the near term [6] Market Outlook - Despite a strong performance, SAP remains cautious about the macroeconomic environment, particularly regarding geopolitical developments and trade policy uncertainties that may affect sales cycles in the U.S. public sector and manufacturing [7][10]

Core Insights - SAP is committed to leveraging artificial intelligence, particularly agents and autonomous systems, to enhance the future of work for its customers [1][2] - The company is expanding its AI assistant, Joule, to autonomously access data and perform specific tasks across various SAP applications [1][2] Product Developments - SAP announced the upcoming launch of a new product called Supply Chain Orchestration, set for the first half of 2026 [3] - This system will utilize agentic AI and draw data from the SAP Business Data Cloud and SAP Business Network to assist supply chain professionals in managing risks [3][5] Market Context - The fluidity of supply chains has become increasingly apparent over the past five years, with supply chain professionals facing constant challenges such as tariffs, wars, and logistics bottlenecks [4][5] - The new system will create a knowledge graph using both SAP-owned and external data to identify issues affecting customers' supply chains [5][6] User Benefits - Supply Chain Orchestration will provide users with contextualized data to identify at-risk products, problematic shipping lanes, and potential revenue impacts [6]

Core Insights - SAP unveiled innovations in AI research and role-based assistants at the inaugural SAP Connect event, emphasizing the integration of AI, data, and applications to enhance productivity and internal collaboration [1][3] - The new network of role-based assistants, Joule, is designed to work alongside humans, enabling them to focus on insights and productivity while managing complex workflows [2][3] Group 1: AI and Role-Based Assistants - Joule acts as an AI copilot, enhancing productivity and facilitating internal collaborations through a network of role-based assistants [1] - Each assistant is tailored to specific business roles, coordinating specialized agents to address complex tasks, such as a People Manager Assistant managing compensation anomalies [2] Group 2: Data Integration and Security - The SAP Business Data Cloud (BDC) Connect enables secure, bidirectional data flow across different systems, addressing the issue of siloed data that limits AI's potential [4] - BDC Connect allows data to remain within SAP systems while being accessible in non-SAP environments, thus enhancing security and mitigating data concerns [5] Group 3: New Product Introductions - New products introduced include SAP Supply Chain Orchestration, which utilizes AI to detect real-time risks among suppliers, and SAP Engagement Cloud, which personalizes interactions based on business-critical context [5] - The next-generation SAP Ariba procurement suite is presented as an AI-native solution for spend management, covering the entire process from sourcing to supplier engagement [5]

Core Insights - SAP SE has launched new AI, data, and application innovations aimed at accelerating business transformation during its first SAP Connect event [1] - The company introduced role-based AI assistants in Joule to enhance performance across various business functions [1][2] - SAP Business Data Cloud Connect was announced as a new data connectivity platform to eliminate data silos and enhance AI value [3] AI Innovations - The AI assistants connect with specialized agents to streamline task management, allowing users to focus on insights and productivity [2] - SAP showcased AI-driven applications such as Supply Chain Orchestration, which uses a live knowledge graph to identify supplier risks in real time [5] - The SAP Engagement Cloud was introduced to personalize interactions using contextual insights, along with a next-generation SAP Ariba procurement suite that embeds intelligence throughout the sourcing and spend management lifecycle [5] Strategic Partnerships - Muhammad Alam emphasized the need for integrated applications to navigate business volatility [4] - Databricks and Google Cloud were named as the first partners for Business Data Cloud Connect, enhancing SAP's open data ecosystem [4] - These partnerships are expected to facilitate quicker access to business-ready data products for analytics and AI applications [4] Market Reaction - Following the announcements, SAP shares increased by 1.39%, closing at $274.28 [6]

Core Insights - SAP SE showcases the integration of AI, data, and applications at the SAP Connect event, emphasizing the creation of business value through innovative solutions [1][2] - The introduction of role-based assistants in Joule aims to enhance human productivity by coordinating various agents across business functions [2][4] Group 1: AI Integration - SAP introduces a new generation of role-aware assistants in Joule, designed to partner with individuals in specific business roles, enhancing productivity and insight [2] - Specialized Joule Agents support these assistants, enabling them to execute complex workflows tailored to specific functions, such as financial planning and people management [2] Group 2: Data Connectivity - SAP Business Data Cloud Connect is launched to eliminate data silos by securely linking SAP BDC with partner platforms, facilitating a bidirectional flow of business-ready data [3] - The partnership with Databricks and Google Cloud allows for faster access to data products, enhancing analytics and AI capabilities for customers [3] Group 3: Application Development - New AI-native solutions like SAP Supply Chain Orchestration and SAP Engagement Cloud are introduced, leveraging AI to improve risk detection and customer interactions [4] - The next-generation SAP Ariba procurement suite is highlighted as an AI-driven solution that enhances spend management processes [4]