SAP shares hit all-time high after upbeat cloud business outlook

Shares in SAP (SAPG.DE) were up 5 per cent at market open on Tuesday, hitting an all-time high of 221 euros ($239.21) after the German software company raised its full-year targets on a strong cloud business in the third quarter.

Cloud revenue grew 27 per cent, adjusted for currency effects, to 4.35 billion euros ($4.71 billion) in the third quarter, boosted by a 36 per cent rise in sales of Cloud ERP Suite resource planning software.

Artificial intelligence was a key growth driver, according to CEO Christian Klein. “Around 30 per cent of our cloud contracts in the third quarter included AI use scenarios,” he said.

With its guidance for 2025 unchanged, Barclays analysts wrote in a note that “even the new guide looks conservative”.

They added that management “encouragingly” spoke on this conservatism.

Operating profit grew by 28 per cent to 2.24 billion euros, exceeding expectations, helped by cost-cutting and a comparatively low number of new hires, CFO Dominik Asam said.

The company expects the cost of its restructuring to come at around 3 billion euros as it evaluates up to 10,000 jobs out of its 100,000 total headcount to prepare for the era of AI.

On this basis, the Walldorf-based group nudged up its full-year cloud and software revenue target to 29.5-29.8 billion euros from 29-29.5 billion euros.

It now sees 2024 operating profit at 7.8 billion euros, up from a forecast of 7.6-7.9 billion euros.

JPM analysts see SAP’s performance as “a read-across to the health of Enterprise IT spending and specifically software within that,” pointing to rivals Oracle (ORCL.N), Workday (WDAY.O) and Microsoft (MSFT.O).