Sap beats expectations in Q1 thanks to the cloud and soars on the Frankfurt Stock Exchange

(Il Sole 24 Ore Radiocor) - Sap romped on the Frankfurt Stock Exchange thanks to a better-than-expected performance in its quarterly accounts. In the first quarter, the enterprise software company posted total revenue on a non-IFRS basis up 6% year-on-year to EUR9.56 billion, with a decisive boost from its core cloud business, which rose 19% to EUR5.96 billion (+27% in constant currencies). Net profit rose to €1.95 billion from almost €1.8 billion in the first quarter of last year. Operating profit, a key indicator for software companies, reached 2.74 billion from 2.33 billion. Analysts had expected total revenue of EUR 9.53 billion, revenue from cloud activities of EUR 5.88 billion, and operating profit of EUR 2.71 billion, according to the company's consensus. Earnings per share amounted to EUR 1.66 for the first quarter, up from EUR 1.52 a year earlier and against the EUR 1.60 expected by analysts.

For the current year, Sap confirmed that it expects non-IFRS operating profit of between EUR 11.9bn and EUR 12.3bn, cloud services revenue of between EUR 25.8bn and EUR 26.2bn, and free cash flow of around EUR 10bn. "We had a great start to the year, with cloud order backlog up 25% and cloud revenues up 27% at constant exchange rates. This performance is supported by our momentum in Business AI, which allows us to already offer concrete results to our customers. We are growing faster than the market and gaining market share through the expansion of our AI suite and solutions,' CEO Christian Klein was quoted as saying in a statement. Barclays confirmed a 'buy' rating on the stock with a price target of EUR 220. Deutsche Bank also maintains its buy recommendation with a target price of EUR 200. 'This is a very solid publication from Sap in the current environment,' says Oddo BHF, which reiterates its 'outperform' rating on the stock, as well as its EUR 208 target price.