SAP surpassed expectations in the second quarter, reporting revenue of €9.88 billion, slightly above analysts' €9.85 billion estimate. The key driver was a 22% surge in cloud revenue, which reached €6.28 billion, reflecting solid demand for the company's cloud and AI solutions. Following the announcement, SAP's shares listed in the U.S. climbed 5.1% after hours, while those traded in Germany rose 6%.
Cloud Growth Fuels Optimism
The firm's current cloud backlog grew 26% in constant currency to €22.90 billion, exceeding the 24.3% growth anticipated by analysts and accelerating from the previous quarter's 25%. Bank of America highlighted this backlog acceleration as a significant positive surprise, maintaining its Buy rating on SAP despite trimming price targets slightly.
CEO Christian Klein attributed these results to the company's Autonomous Enterprise approach, emphasizing how clients lean on SAP's AI-based tools like the Joule assistant and Business AI Platform for accurate, compliant business processes. This focus on AI is particularly relevant as the software sector grapples with the rise of generative AI and automation. However, SAP's U.S.-listed stock has seen a nearly 40% decline year-to-date, underperforming broader tech indexes like the Philadelphia Semiconductor Index, which has surged over 74% in the same period.
Alongside the earnings beat, SAP raised its full-year non-IFRS operating profit guidance slightly to a range of €11.9 billion to €12.3 billion, up from €11.8 billion to €12.2 billion. The company also projects full-year non-IFRS cloud revenue between €25.8 billion and €26.2 billion, and free cash flow around €10 billion, boosted by recent acquisitions including Reltio.
The report noted some headwinds such as a slowdown in sequential revenue growth and increased R&D investments, partially offset by a lower stock-based compensation expense in the first quarter. Net income rose to €7.23 billion from €6.62 billion a year earlier, while non-IFRS operating profit advanced 9% year-over-year to €2.81 billion.
