Slump for Sap in Frankfurt, cloud orders and forecasts disappoint

(Il Sole 24 Ore Radiocor) - Sap in free fall on the Frankfurt Stock Exchange, after clarifying accounts, with cloud orders decidedly below expectations in the fourth quarter and prospects for 2026 considered disappointing. Not even the announcement of a EUR 10 billion buyback seemed to dampen sales on the German software company's stock, which posted its biggest daily drop since October 2020.

In the fourth quarter of 2025, the German software company reported adjusted net profit (non-IFRS) up 17% to almost EUR 1.9 billion, exceeding market consensus by about 8%, according to Invest Securities. Also on a non-IFRS basis, operating profit rose 16% to EUR 2.83 billion and revenue increased 3% to EUR 9.68 billion (up 9% at constant exchange rates). Cloud sales for the fourth quarter reached EUR 5.6 billion (+19%). According to a non-IFRS consensus provided by the company, analysts expected total quarterly revenue of EUR 9.75 billion, cloud revenue of EUR 5.6 billion and operating profit of EUR 2.74 billion, with an operating margin of 28.2%.

Triggering the sales, however, was Sap's Current Cloud Backlog, which rose 16% in the fourth quarter to EUR21.1 billion, but expectations were pointing to a 26% increase, Ubs analysts noted, anticipating market disappointment. "Large transformational deals with high cloud revenue increases in recent years and statutory termination for convenience clauses negatively impacted current fourth quarter cloud order book growth in constant currency by about 1 percentage point," Sap pointed out in its press release. 2025 ended with revenues of EUR 36.8 billion (+8%), operating profit of EUR 10.4 billion (+28%) and net profit of EUR 7.2 billion (+36%). The total order backlog at the end of the year amounted to 77.3 billion (+22%). For 2026, the group expects cloud revenue to grow between 23% and 25% at constant currencies to between EUR 25.8 billion and EUR 26.2 billion, cloud and software revenue to between EUR 36.3 billion and EUR 36.8 billion (+12%/13%), while operating profit is expected to grow 14% to 18% to EUR 11.9 billion to EUR 12.3 billion. Free cash flow is estimated at around EUR 10 billion in today's currencies (from EUR 8.24 billion in 2025).

Management also announced a new EUR 10 billion share buyback authorisation, which will begin in February and be completed by fiscal year 2027. Jefferies estimates that the buy back will represent around 4% of the current market capitalisation. The US broker notes that "as usual, Sap's results present both positive and negative aspects", pointing out that the 12-13% constant currency growth forecast for cloud and software revenues for 2026 compares with consensus estimate of 13.2%. Jefferies nevertheless maintains its positive view on the stock, recommending buying it, with a price target confirmed at EUR 290. Goldman Sachs, in turn, maintained its 'Buy' recommendation on Sap shares after the publication of the results, with a target price of EUR 320, even though it expects a very slight decline in revenue forecasts for 2026. JP Morgan confirmed its 'Overweight' recommendation on Sap, maintaining its target price at EUR 290. According to JpM analysts, cash flow forecasts for the leading European software company for 2026 exceed market consensus, but the cloud's order book is proving disappointing.