SAP(US:SAP)2024-04-23 01:14Financial Data and Key Metrics Changes - Current Cloud backlog grew 28% to EUR14.2 billion, marking the fastest growth on record [16] - Cloud revenue increased 25% year-on-year, reaching EUR3.9 billion [16] - Operating profit for Q1 was EUR1.5 billion, a 19% increase compared to the previous year [16] - Total revenue surpassed $8 billion in Q1, up 9% year-over-year [32] - Non-IFRS operating profit grew by 19%, despite a EUR135 million increase in stock-based compensation [71] Business Line Data and Key Metrics Changes - Cloud ERP Suite revenue grew 32% to EUR3.2 billion, continuing its strong momentum [20] - Software license revenue decreased by 25%, illustrating a shift towards cloud-based solutions [32] - Cloud gross profit increased by 28%, with gross margin improving to 72.5% [33] Market Data and Key Metrics Changes - Strong cloud revenue performance noted in APJ and EMEA regions, with Brazil, Canada, Germany, Italy, UAE, India, and South Korea showing outstanding growth [54] - The US, Japan, and Spain also demonstrated strong performance in cloud revenue growth [54] Company Strategy and Development Direction - The company is focused on its three growth drivers: RISE with SAP, GROW with SAP, and innovations in Business AI [23] - The modular and integrated Cloud ERP is positioned to capture a $700 billion market opportunity by 2027 [20] - The transformation program initiated in January aims to enhance operational efficiencies and improve financial performance [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 2024 and 2025 goals, citing strong momentum in cloud backlog and revenue [19] - The company anticipates significant efficiencies from embedding AI across all processes, projecting triple-digit million amounts in savings [49] - The management highlighted the importance of digital transformation and SAP's role as a partner of choice in this evolving landscape [30] Other Important Information - The company has adjusted its reporting practices to incorporate share-based compensation into non-IFRS results [14] - The upcoming Financial Analyst Conference is scheduled for June 5, 2024, as part of the Sapphire event in Orlando, Florida [14] Q&A Session All Questions and Answers Question: Margin side and Rule of 40 - Management discussed the potential for continued margin expansion and the Rule of 40, indicating that they are currently at 25% and aiming to improve this metric over time [37][39] Question: AI monetization - Management clarified that AI is included in base packages and that additional GenAI models are being delivered, with consumption-based pricing for premium offerings [61] Question: CCB growth and AI impact - Management noted that the increase in CCB is driven by AI demand, with expectations for sustainable growth in the high 20s [64][67] Question: Cloud migration update - Management reported that many customers are accelerating their migration to S/4 due to the capabilities offered by Business AI [91] Question: Large deal strength - Management confirmed that large deals are primarily driven by migrations and RISE with SAP, with significant cross-sell opportunities identified [94][96]