- SAP’s shares reached a record high after it exceeded third-quarter profit and sales expectations, driven by strong demand for its cloud and AI products.
- The company raised its sales outlook for the year, reflecting confidence in continued growth in both its cloud offerings and AI-integrated solutions.
SAP’s U.S.-listed shares have reached a record high, following the company’s strong third-quarter earnings report, which surpassed analysts’ expectations. The German software giant, best known for its enterprise resource planning (ERP) solutions, is experiencing a surge in demand for its cloud-based offerings and AI products.
What happened
In its third-quarter results, SAP reported earnings per share of €1.25 ($1.35), with total revenue rising 9% year-over-year to €8.47 billion ($9.16 billion). This marked a notable increase from market predictions, as consensus estimates from analysts had been more conservative. The key driver behind this performance was a significant 25% jump in cloud revenue, which reached €4.35 billion, alongside an 11% rise in overall cloud and software sales to €7.43 billion.
Also read: Penguin Random House blocks AI training on its books
Also read: UCL researchers set new wireless transmission speed record
CEO Christian Klein emphasized SAP’s progress in integrating AI into its cloud offerings, stating that a substantial portion of the company’s cloud deals in Q3 involved AI applications. “We are making strong progress,” Klein said, underlining the company’s strategic push to incorporate AI into its services, meeting the growing needs of businesses seeking more advanced, automated solutions.
SAP’s cloud backlog, another key indicator of future revenue potential, also saw a 25% rise, reaching €15.4 billion, which speaks to the ongoing demand for its solutions.
Why this is important
SAP’s performance reflects a broader shift in the enterprise technology landscape, where businesses are increasingly prioritizing cloud computing and artificial intelligence. The company’s ability to seamlessly blend AI into its cloud solutions positions it as a critical player in the global digital transformation movement. SAP’s cloud growth of 25%, coupled with the AI-enhanced offerings, demonstrates that its customers are seeking more sophisticated, integrated systems to handle complex business operations, something that SAP is clearly capitalizing on.
By raising its sales forecast for the year, SAP is signaling confidence in its strategy and future growth. The company now expects cloud and software revenue for the full year to land between €29.5 billion and €29.8 billion, reflecting an upward revision of €400 million at the midpoint. Free cash flow estimates were also updated, now expected to fall between €3.5 billion and €4.0 billion.
This performance boost has led SAP’s ADRs to climb more than 50% in 2024, reflecting investor confidence in the firm’s direction. As SAP continues to innovate within the realms of cloud and AI, the company appears well-positioned to sustain its momentum, reinforcing its leadership in the enterprise software space.
