SAP(US:SAP)2025-07-22 22:02Financial 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]