Core Insights - SAP has agreed to acquire Reltio to enhance data integration and quality for AI across various environments, with completion expected in Q2 or Q3 of 2026, pending regulatory approval [1] - The acquisition aims to incorporate Reltio's data management capabilities into SAP's Business Data Cloud (BDC), supporting enterprise-wide AI initiatives by providing consistent and reliable data [2] Group 1: Acquisition Details - Financial details of the transaction have not been disclosed [1] - Reltio's platform offers end-to-end enterprise data governance using AI-based entity resolution to merge records from various formats into a single source [3] - The integration of Reltio is expected to strengthen BDC's capabilities for business AI use cases, improving decision-making and reducing integration complexity [4] Group 2: Technology and Features - Reltio's cloud-native architecture supports complex IT landscapes and includes features like real-time data delivery and multi-agent workflows [3] - Industry-specific solutions from Reltio cater to sectors such as life sciences, healthcare, and financial services [3] - SAP plans to offer flexible commercial options for customers to purchase Reltio independently or bundled with other SAP products [5] Group 3: Strategic Implications - The acquisition is intended to extend Reltio's capabilities within SAP's expanding suite of cloud-based business services [5] - Reltio's founder emphasized the opportunity to accelerate their mission by joining forces with SAP, enhancing their ability to deliver a unified system of context across environments [6]

Core Viewpoint - SAP SE is restructuring its executive board to prioritize artificial intelligence in response to increasing pressure from the technology sector and investor concerns about the value of its AI offerings [1][2]. Group 1: Executive Changes - CEO Christian Klein will transfer oversight of the sales department to Thomas Saueressig, who will become Chief Customer Officer on April 1 [2]. - A new vertical called the Customer Value Group will be created under Saueressig, integrating sales and customer relations [3]. - Board member Muhammad Alam will not renew his contract due to personal reasons, contributing to high turnover in SAP's executive board [4][5]. Group 2: Market Response - SAP shares fell 2.4% to €166.86 following the announcement of the reorganization, marking a 39% decline over the past year [4]. - Investors are increasingly wary of software-as-a-service companies due to fears of disruption from AI technologies [2]. Group 3: AI Product Concerns - SAP's AI assistant Joule, launched in 2023, has faced user dissatisfaction, with reports indicating that the tools are difficult to use and not perceived as worth the additional cost [6].

Core Insights - The discussion highlights significant advancements in AI, particularly in the application layer, over the past 12 months [1] - The company has seen an increase in inquiries from the investor community regarding AI developments and applications [2] Company Developments - In 2024, the company introduced around 10 generative AI use cases into production, marking a notable step in its AI strategy [2] - The company announced the launch of Joule and AI Core, which serve as a generative AI hub for building applications [2]

Summary of Conference Call on SAP's AI Developments Company and Industry Overview - **Company**: SAP - **Industry**: Software and Artificial Intelligence (AI) Key Points and Arguments AI Advancements - In the past year, SAP has significantly increased its generative AI features from 10 to approximately 130, showcasing rapid development in AI applications [4][3] - Joule, SAP's AI platform, has expanded to include around 1,400 skills, enabling users to perform various tasks through AI [5] - The introduction of 30 productive agents and the AI Agent Hub has enhanced the functionality of SAP's AI offerings [5][6] - SAP has developed a massive knowledge graph linking 452,000 tables and 7.3 million fields, which supports AI functionalities [6][7] Foundation Models - SAP has transitioned from experimental models to productive use of its Relational Pre-trained Transformer (RPT-1), which replaces numerous narrow machine learning models with a single, more accurate model [8][9] - RPT-1 has been recognized with a Spotlight Award at the NeurIPS conference, indicating its significance in the AI landscape [9] Future Trends and Innovations - The company anticipates further acceleration in AI developments, with a focus on foundation models beyond large language models, including robotics and world models [10] - SAP is actively working on agentic governance to manage the lifecycle of AI agents, ensuring they are effectively integrated into business processes [11] Disruption in SaaS and Software Development - SAP acknowledges that AI will disrupt traditional user interfaces and software development processes, moving towards intent-driven systems where users can interact with software through natural language [14][16] - The company is implementing live coding practices to enhance developer productivity and facilitate quicker software updates [18][19] Commercial Model Changes - SAP's AI commercial model is based on consumption, where customers subscribe to AI units tied to business outcomes, moving away from traditional seat-based licensing [23][24] - Approximately 40-50% of SAP's revenue is now derived from metrics other than seat-based subscriptions, indicating a shift in their business model [24] Competitive Landscape - SAP is positioned to navigate the evolving AI landscape by leveraging its extensive data and customer trust, which are seen as defensive moats against competition [25][26] - The company is cautious about the rise of horizontal software competitors but believes its deep industry solutions provide a competitive edge [32][33] Customer Engagement and Adoption - Joule's adoption has seen a ninefold increase in customer engagement, indicating strong market interest in SAP's AI solutions [49][54] - The company is focused on AI-assisted cloud migration, which is expected to enhance customer efficiency and reduce transformation costs [57][63] Ecosystem and Partnerships - SAP is actively collaborating with hyperscalers and AI model providers, treating them as partners rather than competitors [37][38] - The company is monitoring the startup landscape for potential partnerships but remains cautious about high valuations and the readiness of these startups to meet enterprise needs [40][41] Conclusion - SAP is strategically positioning itself to be a leader in the AI-driven software market by enhancing its product offerings, adapting its commercial model, and leveraging its extensive data and customer relationships to navigate the competitive landscape [26][34][72]

Financial Data and Key Metrics Changes - The total revenue for the full year approached EUR 37 billion, up 11% year-on-year [33] - Cloud revenue grew 26% year-on-year, primarily driven by the strong performance of the Cloud ERP Suite, which increased by 32% [32][33] - The current cloud backlog reached EUR 21 billion, up 25%, while the total cloud backlog grew 30% to a record EUR 77 billion [31][32] Business Line Data and Key Metrics Changes - The Cloud ERP Suite accounted for 86% of total cloud revenue for the year, highlighting its significance as a growth engine [33] - Software licenses revenue decreased by 27%, indicating a shift in focus towards cloud offerings [33] Market Data and Key Metrics Changes - The U.S. public sector was one of the best-performing businesses in Q4, showing resilience despite geopolitical tensions [41] - The company noted that customers are increasingly exploring sovereign software-as-a-service solutions due to geopolitical factors [31] Company Strategy and Development Direction - The company emphasized its transformation strategy, "RISE and GROW with SAP," as core pillars for large-scale enterprises and mid-sized companies [30] - AI and the Business Data Cloud are becoming significant contributors to customer decisions and deal activity, with large cloud transactions contributing a record 71% to cloud order entry in Q4 [30] - The company plans to further develop its SAP Sovereign Cloud Infrastructure to meet growing demand for sovereignty and resilience in software solutions [39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's outlook for 2026, despite challenges faced in 2025 due to geopolitical tensions [28][30] - The company anticipates total revenue growth to accelerate, supported by the foundation built in previous years [37] - Management highlighted the importance of reskilling employees to adapt to the changing landscape influenced by AI [24] Other Important Information - The company announced a new two-year share repurchase program of up to EUR 10 billion, reflecting confidence in sustainable business strengths [36] - Free cash flow for the full year was EUR 8.2 billion, at the high end of the revised outlook range, indicating strong cash management [35] Q&A Session Summary Question: Are there hurdles in the U.S. due to geopolitical tensions? - Management noted that the U.S. public sector performed well in Q4, and customers are less concerned about the origin of the software as long as it meets regulatory standards [41] Question: Are solutions intended to replace non-European providers? - Management clarified that the focus is on competitiveness and delivering stronger AI solutions rather than replacing specific providers [43] Question: How do U.S. tariffs affect the business? - Management stated there are no direct tariffs on software or services, and the company hopes this remains the case [58] Question: Why is the company starting a share buyback program instead of investing in future revenue? - Management explained that share buybacks are part of a strategy to return capital to shareholders while maintaining flexibility for future investments in technology [59][60]

Financial Data and Key Metrics Changes - The total revenue for the full year approached EUR 37 billion, up 11% year-on-year [34] - Cloud revenue grew 26% year-on-year, primarily driven by the strong performance of the Cloud ERP Suite, which increased by 32% [32][34] - The current cloud backlog reached EUR 21 billion, up 25%, while the total cloud backlog grew 30% to a record EUR 77 billion [31][32] Business Line Data and Key Metrics Changes - The Cloud ERP Suite accounted for 86% of total cloud revenue for the year, highlighting its position as a key engine of growth [34] - Software licenses revenue decreased by 27%, indicating a shift in focus towards cloud offerings [34] Market Data and Key Metrics Changes - The company reported a significant increase in deal volumes greater than EUR 5 million, contributing a record 71% to cloud order entry in Q4 [30] - The public cloud business was growing five times faster than the private cloud business, showcasing the success of the cloud transformation [5] Company Strategy and Development Direction - The company emphasized its transformation strategy, "RISE and GROW with SAP," as core pillars for large-scale enterprises and high-growth mid-sized companies [30] - AI and the Business Data Cloud are emerging as meaningful contributors to customer decisions and deal activity, with a focus on enhancing customer value [30][40] - The company aims to leverage its strong position in the market to address the growing demand for sovereign software-as-a-service solutions [31][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's outlook for 2026, despite geopolitical tensions impacting business [28][39] - The company anticipates total revenue growth to accelerate, supported by the foundation built in previous years [38] - Management acknowledged the challenges faced in 2025 but highlighted the resilience demonstrated in cloud revenue performance [52] Other Important Information - The company plans to initiate a two-year share repurchase program of up to EUR 10 billion, reflecting confidence in sustainable business strengths [37] - Free cash flow for the full year was approximately EUR 8.2 billion, at the high end of the revised outlook range [36] Q&A Session Summary Question: Are there hurdles in the U.S. due to geopolitical tensions? - Management noted that the U.S. public sector performed well in Q4, with customers less concerned about the origin of the software as long as regulatory standards are met [43][44] Question: Are solutions intended to replace offerings from non-European providers? - Management clarified that the focus is on competitiveness and delivering stronger AI solutions rather than replacing non-European offerings [45] Question: How do U.S. tariffs affect the business? - Management stated there are no direct tariffs on software or services, and the indirect impact has been manageable, with Q4 showing strong performance in the U.S. public sector [61] Question: Why initiate a share buyback program instead of investing in future revenue? - Management explained that share buybacks are part of a balanced approach to capital returns, and future M&A opportunities will be considered for technological advancements [63][64]

Financial Data and Key Metrics Changes - Total revenue for the full year approached EUR 37 billion, up 11% year-on-year [33] - Cloud revenue grew 26% year-on-year, primarily driven by the strong performance of Cloud ERP Suite, which increased by 32% [32][33] - Non-IFRS basic earnings per share increased by 36% to €6.15 [37] - Free cash flow for the full year was EUR 8.2 billion, at the high end of the revised outlook range [36] Business Line Data and Key Metrics Changes - Cloud ERP Suite accounted for 86% of total cloud revenue for the year, highlighting its importance as a growth engine [33] - Software licenses revenue decreased by 27%, indicating a shift in focus towards cloud solutions [33] - The current cloud backlog reached EUR 21 billion, up 25%, while total cloud backlog grew 30% to a record EUR 77 billion [31][32] Market Data and Key Metrics Changes - The public cloud business grew five times faster than the private cloud business, showcasing a significant shift in customer preferences [5] - The company reported its best bookings result in Q4, contributing to a strong finish for the year [3][10] Company Strategy and Development Direction - The company emphasizes AI and the Business Data Cloud as core components of its transformation strategy, aiming to enhance customer decision-making and deal activity [30] - The strategy includes a focus on large-scale enterprises and high-growth mid-sized companies undergoing complex transformations [30] - The company plans to further develop its SAP Sovereign Cloud Infrastructure to meet growing demand for sovereign software solutions [40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate geopolitical tensions and emphasized the importance of operational discipline [29][39] - The outlook for 2026 includes expectations for total revenue growth to accelerate, supported by the foundation built in 2025 [38] - Management acknowledged the challenges faced in 2025 but highlighted the resilience demonstrated in cloud revenue performance [51] Other Important Information - The company announced a new two-year share repurchase program of up to EUR 10 billion, reflecting confidence in sustainable business strengths [36][37] - The company is committed to reskilling its workforce to adapt to the changing landscape influenced by AI [25] Q&A Session Questions and Answers Question: Are there hurdles in the U.S. due to growing tensions between countries? - Management noted that the U.S. public sector performed well in Q4, with customers less concerned about the origin of the software as long as regulatory standards are met [42][43] Question: Are solutions intended to diversify or replace offerings from non-European providers? - Management clarified that the focus is on competitiveness rather than replacing non-European offerings, emphasizing the need for stronger AI capabilities [44] Question: How do geopolitical tensions impact the business outlook? - Management indicated that the 2025 environment is considered the new normal, with resilience shown despite geopolitical challenges [51][52] Question: What is the rationale behind the share buyback program? - Management explained that share buybacks are part of a balanced approach to capital returns, alongside potential future M&A for technological advancements [60][62]

Core Insights - SAP achieved its best bookings result in Q4, with lower churn and stable discounting, indicating a successful quarter amidst ongoing transformation efforts [1][3] - The company met its 2025 outlook for cloud and software despite challenges in the first half of the year, attributing strong performance to cost discipline and AI integration [2][3] Financial Performance - Cloud revenue increased by 26%, with the Cloud ERP Suite growing by 32%, contributing to a full-year non-IFRS operating profit of €10.4 billion [4][16] - Total cloud backlog reached a record €77 billion, up 30%, while current cloud backlog grew by 25%, reflecting a shift towards larger public-sector deals [5][16] - Free cash flow for 2025 was approximately €8.2 billion, with a new €10 billion share repurchase program announced [15][17] AI and Product Strategy - AI is driving significant deal momentum, with over two-thirds of Q4 cloud orders including Business AI, and 90% of the largest deals incorporating AI or SAP Business Data Cloud [6][11] - The Business Data Cloud generated over €2 billion in order entry since its launch, emphasizing its strategic importance for integrating SAP and non-SAP data [9] - SAP's product strategy focuses on a unified platform for business transformation, enhancing user experience and embedding AI into core workflows [10][12] Market Position and Growth - The mid-market segment is now the fastest-growing area for SAP, with several thousand new customers acquired in recent years [7] - SAP's public cloud business grew five times faster than its private cloud business in 2025, indicating strong market demand [7] - The company expects to accelerate total revenue growth and achieve record free cash flow of approximately €10 billion in 2026 [17] Geopolitical and Market Considerations - SAP's performance in the U.S. public sector remained strong, with customers focusing on regulatory compliance rather than vendor origin [18] - Management acknowledged the impact of geopolitical tensions on deal closures but remains optimistic about future growth [2][18]

Financial Data and Key Metrics Changes - The total cloud backlog reached EUR 77 billion, up 30% year-on-year, indicating strong underlying business momentum [7][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 Line Data and Key Metrics Changes - The Cloud ERP Suite accounted for 86% of total cloud revenue for the year, highlighting its role as a key growth engine [27] - The number of customers using the AI copilot tool grew ninefold over the year, with over 60% of existing cloud customers actively using AI [6][56] Market Data and Key Metrics Changes - 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 Development Direction - The ongoing transformation of SAP's operating model, combined with AI integration, is expected to drive future growth and revenue acceleration through 2027 [14][22] - The company is focusing on a Partner-First approach for the mid-market and expanding its sovereign cloud capabilities [12][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged geopolitical uncertainty and macroeconomic volatility but emphasized the increasing demand for AI solutions among customers [4][24] - The company expects a record free cash flow of approximately EUR 10 billion in 2026, supported by continued 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: Insights on CCB and pipeline for Q1 - Management noted that the CCB ended at 25%, with larger deals contributing to longer ramp periods and some slippage, but overall bookings performance was ahead of plan [39][41] Question: AI-driven cost savings and R&D focus - The company aims to achieve EUR 2 billion in cost efficiencies through business growth and AI integration, with no current restructuring plans [46][48] Question: AI adoption among existing customers - Approximately 60% of existing cloud customers are actively using AI, with significant revenue uplift observed from early adopters [56][60] Question: Dynamics of TCB growth and BDC momentum - Management acknowledged a deceleration in TCB growth but emphasized a strong pipeline and the expected contribution from the Business Data Cloud in 2026 [72]

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]