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]

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]

Core Insights - SAP reported strong second-quarter results with adjusted earnings of $1.70, surpassing the consensus estimate of $1.47 [1] - Quarterly revenue reached $10.23 billion, exceeding the Street estimate of $9.11 billion [1] Financial Performance - Current cloud backlog stands at $21.26 billion, reflecting a 22% increase, and a 28% increase at constant currencies [4] - Cloud revenue grew by 24%, with a 28% increase at constant currencies [4] - Revenue from the Cloud ERP Suite increased by 30%, and by 34% at constant currencies [4] - Total revenue rose by 9%, with a 12% increase at constant currencies [4] - IFRS operating profit was reported at $2.93 billion, while non-IFRS operating profit was $3.05 billion, marking a 32% increase and a 35% increase at constant currencies [4] Strategic Initiatives - CEO Christian Klein highlighted the impact of AI innovations, such as Joule and SAP Business Data Cloud, in strengthening the company's portfolio [3]

Core Insights - Infosys has launched the Infosys Enterprise Innovation Lab for SAP Solutions in Düsseldorf, Germany, aimed at accelerating enterprise transformation through AI, data, and cloud solutions [1][2][3] - The lab will facilitate co-creation of tailored solutions to address business challenges and enhance operational efficiency, financial performance, and decision-making through real-time data insights [2][3] Group 1: Lab Features and Offerings - The lab will provide access to Infosys Topaz and SAP Business AI, enabling organizations to discover possibilities and develop practical applications [5] - It offers a collaborative workspace for customers and experts to co-create AI solutions tailored to specific business needs [5] - The lab aims to create a foundation for designing AI and data strategies that align with business goals through clear plans and use cases [5] Group 2: Strategic Collaboration - Infosys and SAP are collaborating to revolutionize business transformation by integrating enterprise-wide data to fuel AI-based solutions [2][3] - The partnership emphasizes the importance of faster, flexible transformations with lasting value, leveraging AI-powered innovation and seamless cloud adoption [3] - Infosys has over 25 years of expertise in SAP software transformation, which will be utilized to develop cloud and AI solutions across various industries [3] Group 3: Business Outcomes - The collaboration aims to empower businesses to leverage the full potential of cloud, data, and AI, resulting in enhanced efficiency, improved decision-making, significant cost savings, and future-readiness [3] - Solutions developed in the lab will be available across Infosys' global network of over 12 Living Labs, expanding the reach and impact of these innovations [2]

Core Insights - The success of AI strategies heavily relies on reliable data, with 94% of technology leaders focusing more on data due to the ongoing AI trend [2] - Companies face challenges in selecting the right partners to unlock data value and drive AI projects amid rapid market changes [2] Group 1: Data Transformation Strategies - Companies can follow three actionable paths for successful data transformation: empowering critical business applications, transitioning from transactional to intelligent applications, and leveraging open ecosystems [3][5][7] - Only 34% of business leaders express high trust in their data, indicating a significant challenge in data integration and management [3] - Business data fabric can simplify data management by providing an integrated, semantically rich data layer, enabling easier access to trustworthy data [3] Group 2: SAP Business Data Cloud - SAP Business Data Cloud offers a fully managed SaaS solution that unifies and governs both SAP and third-party data, facilitating strategic data projects [4] - The "zero copy share" method of SAP Business Data Cloud reduces complexities in data environments, allowing companies to focus on transformative data initiatives [4] - SAP's intelligent applications, built on its extensive business process experience, are designed to embed smart capabilities directly into core business processes [5][6] Group 3: Importance of Open Ecosystems - Companies should choose vendors with an open ecosystem strategy to access diverse industry expertise and extend solutions across multiple cloud platforms [7] - SAP's partnership strategy exemplifies this approach, as seen in collaborations with Adobe and Moody's to enhance data insights and application capabilities [7] - The integration of data and AI is crucial for future business success, with companies viewing data as a strategic asset leading to a 28% higher AI adoption rate [8]

Core Viewpoint - SAP stock is currently near its 52-week high, raising questions about whether to hold or sell, with a focus on evaluating the company's strengths and weaknesses [1] Group 1: Cloud Business Performance - SAP's cloud business is a significant driver of growth, with a cloud backlog increasing by 28% to €18.2 billion in Q1 [2] - Cloud revenues rose 27% year-over-year to €4.99 billion, with Cloud ERP Suite revenues growing 34% to €4.25 billion, making up 85% of total cloud revenues [2] - The launch of SAP Business Data Cloud aims to unify enterprise data and has already resulted in 20 deals in Q1 [4] Group 2: Revenue Predictability and Growth Outlook - 86% of SAP's total revenues are now classified as predictable, enhancing long-term earnings visibility [3] - Management projects cloud revenues for the year to be between €21.6 billion and €21.9 billion, reflecting a year-over-year increase of 26-28% [8] Group 3: AI Investments and Future Prospects - SAP is optimistic about the impact of generative AI on future revenues, with over 1,300 skills integrated into its AI co-pilot [9] - The company plans to invest heavily in AI, with more than 30,000 developers focused on enhancing its AI capabilities by 2025 [9] Group 4: Challenges and Market Conditions - SAP faces challenges with declining software license revenues, which fell 10% year-over-year to €0.18 billion, and a 1% decline in services revenue to €1.07 billion [10] - The company is navigating a volatile macroeconomic environment, increasing costs, and stiff competition in the cloud sector [10] Group 5: Investment Strategy and Analyst Outlook - Analysts have raised earnings estimates for SAP over the past 60 days, with increases of 1.9% for the current quarter and 3.3% for the current year [11][13] - Despite a strong growth outlook, SAP's premium valuation with a forward P/E ratio of 41.06X compared to the industry's 31.72X suggests caution for new investors [15]

Core Insights - SAP SE has introduced innovations and partnerships aimed at enhancing business productivity by up to 30 percent through the use of Business AI [1][2] - The generative AI assistant Joule is designed to provide personalized answers and streamline workflows across various applications [2][3] AI Innovations - Joule can assist users throughout their workday, providing real-time insights and anticipating needs while adhering to ethical AI guidelines [3] - A collaboration with Perplexity enhances Joule's capabilities to answer complex business questions using structured and unstructured data [4] - An expanded library of Joule Agents is introduced to optimize business processes across various functions such as customer experience and supply chain management [5] AI Development and Applications - SAP has launched an AI Foundation that serves as an operating system for developing and scaling AI solutions, allowing for quicker creation of effective AI prompts [6] - New intelligent applications in SAP Business Data Cloud are designed to continuously learn and optimize business processes using critical data [7] Strategic Partnerships - SAP is partnering with Palantir to support joint customers in their cloud migration and modernization efforts, facilitating a harmonized data foundation [8] Cloud Solutions - SAP Business Suite packages are introduced to simplify cloud solution adoption for customers, allowing for customization to meet specific business needs [9] - A new solution leveraging Joule aims to accelerate cloud transition, potentially delivering up to 35 percent faster time to value [10]

Financial Data and Key Metrics Changes - Current cloud backlog increased by 29% to €18.2 billion in Q1 [5][37] - Quarterly cloud revenue grew by 26%, approaching the €5 billion mark [5][37] - Total revenue rose by 11% to €9 billion [42] - Operating profit surged by 58% to €2.5 billion, significantly exceeding the guidance for the year [41][45] - Cloud gross margin improved by 2.6 percentage points to 75% [6][40] Business Line Data and Key Metrics Changes - Cloud ERP suite revenue maintained high growth momentum with a 33% increase in Q1, accounting for 85% of total cloud revenue [37] - Software licenses decreased by only 10%, indicating resilience despite being a smaller quarter [38] - Approximately half of cloud order entries included AI use cases, reflecting strong demand for AI integration [13] Market Data and Key Metrics Changes - Strong cloud revenue performance noted in APJ and EMEA regions, with Brazil, Germany, and India showing outstanding results [40] - The Americas region also demonstrated robust performance, with notable strength in Canada and the US [40] Company Strategy and Development Direction - Company emphasizes a suite-first, AI-first approach to expand its offerings [36] - Focus on product innovation, particularly with the launch of Business Data Cloud, which aims to unify and govern business data [22][23] - Continued investment in AI and cloud solutions to enhance customer productivity and reduce implementation costs [30][31] Management's Comments on Operating Environment and Future Outlook - Management expresses confidence in the company's resilience despite high market uncertainty [9][45] - The pipeline for the year remains solid, with no significant deterioration in conversion rates observed [56] - Management acknowledges potential risks from geopolitical tensions and trade disputes but maintains a positive outlook for long-term growth [44][120] Other Important Information - The company plans to provide deeper insights into its growth strategy at the upcoming Sapphire event in May [34][47] - The transformation program concluded in 2024, positioning the company for focused investments in key areas [36] Q&A Session Summary Question: Current trading and confidence in cloud revenue guidance - Management noted strong customer engagement and resilience in supply chains, which supports confidence in cloud revenue guidance despite macro uncertainties [52][56] Question: Deceleration in cloud revenue growth - Management explained that the deceleration was influenced by the timing of cloud deals and expected a rebound in Q2 as these deals ramp up [58][62] Question: Current cloud backlog performance - Current cloud backlog performance was in line with expectations, with no significant changes in customer dynamics despite tariff uncertainties [68][71] Question: Product innovation and Business Data Cloud differentiation - Management clarified that Business Data Cloud offers a more comprehensive solution than the previous SAP Datasphere, enabling better data integration and AI capabilities [78][83] Question: Impact of tariffs on business and cloud margins - Management indicated that while tariffs could impact hardware costs, the company's multi-cloud strategy provides price security and mitigates risks [130][132]

Financial Performance - Cloud revenue increased by 27% (26% @cc) to €4993 million[6, 19, 23, 30] - Cloud ERP Suite revenue grew by 34% (33% @cc) to €4251 million[6, 19] - Current cloud backlog increased by 28% (29% @cc) to €18202 million[6, 19] - Total revenue increased by 12% (11% @cc) to €9013 million[19, 23, 30] - Cloud and software revenue increased by 14% (13% @cc) to €7938 million[19, 23, 30] - Non-IFRS operating profit increased by 60% (58% @cc) to €2455 million[19, 30] - Free cash flow increased by 36% to €3583 million[24, 36] Regional Performance - APJ cloud revenue increased by 39% (39% @cc)[21] - EMEA cloud revenue increased by 30% (29% @cc)[21] - Americas cloud revenue increased by 21% (19% @cc)[21] Outlook - The company expects cloud revenue to be between €216 billion and €219 billion @cc, a growth of 26%-28%[25] - The company expects cloud and software revenue to be between €331 billion and €336 billion @cc, a growth of 11%-13%[25]