In Frankfurt, SAP is gaining momentum; its cloud business beats expectations for the quarter and drives the sector forward
The group’s results have brought relief to the entire software sector, providing a boost to Nemetschek, TeamViewer and, above all, Atoss
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(Il Sole 24 Ore Radiocor) - SAP soars on the Frankfurt Stock Exchange thanks to quarterly results underpinned by a cloud performance that exceeded analysts’ expectations. Shares in the enterprise software giant rose by more than five points, taking the lead in the DAX 40 and among the top performers on the Stoxx Europe 600, after hitting a low of €127.50 on Thursday – its lowest level since November 2023. What’s more, SAP’s results have provided a boost to the entire software sector, driving gains on the German market for Nemetschek (+4.3%), TeamViewer (+2.3%) and, above all, Atoss (+6%), which are leading the MDax and SDax indices.
On a non-IFRS basis, SAP reported that second-quarter revenue rose by 9 per cent to €9.88 billion and that revenue from cloud solutions grew by 22 per cent to €6.28 billion. Analysts had forecast total revenue of €9.85 billion and cloud revenue of €6.26 billion. Non-IFRS operating profit, a key indicator for software companies, rose by 7% to €2.74 billion, whilst net profit improved by 5% to €1.83 billion. The market was particularly impressed by net cash flow from operating activities, which rose by 22% to 3.1 billion, free cash flow, which grew by 27 per cent to 3 billion, and the current cloud backlog, which recorded a 27 per cent increase to 22.9 billion euros, exceeding expectations.
“The second quarter was another positive quarter, characterised by sustained growth in the current cloud backlog and free cash flow, despite a volatile macroeconomic environment,” commented CFO Dominik Asam, explaining that the group is “resolutely driving forward its transformation into an Autonomous Enterprise, leveraging AI to simultaneously increase both effectiveness and efficiency”. At the same time, SAP has revised downwards its non-IFRS operating profit forecast for the current financial year, bringing it to a range of between €11.8 and €12.2 billion, compared with the previous estimate of €11.9–12.3 billion, “to take into account the dilutive impact of the acquisitions of Dremio and Prior Labs, which were finalised in July”.
The company has confirmed that it expects non-IFRS revenue for its cloud business to be between €25.8 and €26.2 billion, and total cloud and software revenue to be between €36.3 and €36.8 billion, as well as free cash flow of around €10 billion. According to analysts at the private bank Metzler, the second quarter could allay the concerns recently expressed about SAP and the sector regarding artificial intelligence.
Experts at Jefferies believe that the recent caution shown by investors has been dispelled, which should be enough to fuel a recovery in the share price. SAP’s decision to reaffirm its full-year revenue guidance demonstrates the German group’s prudence, Citi notes in a report, observing that growth below the average forecast is unlikely, given the strength of the current order book in the cloud sector. For JP Morgan analysts, however, the quarter’s EBIT and margins represent unpleasant surprises. SAP explained that the second-quarter margin was anomalous due to cost pressures and the cost-cutting measures currently in place, JP Morgan notes.
