SAP Reports Strong Growth in Cloud Business, Stock Rises 4.5%
SAP’s Third Quarter Performance
SAP, a leading software company, saw its stock rise by 4.5% on Thursday following the release of its third quarter financial results. The company reported higher revenue and operating profit, driven primarily by the growth of its core cloud business.
On a non-IFRS basis, SAP’s total revenue for the quarter reached €7.74 billion ($8.16B), up from €7.48 billion in the same period the previous year. The company’s cloud revenue also experienced substantial growth, reaching €3.47 billion compared to €2.99 billion previously. However, software-license revenue declined from €406 million to €335 million.
Analysts’ Expectations and CEO’s Comments
Analysts had predicted revenue of €7.73 billion and cloud revenue of €3.53 billion. They also expected an operating profit of €2.19 billion with a 28.4% operating margin. SAP’s CEO, Christian Klein, expressed satisfaction with the results, stating, “We accelerated cloud growth across our portfolio and significantly expanded our cloud gross margins.”
Outlook for the Full Year
SAP maintains its expectations for the full year, anticipating a non-IFRS operating profit at constant currencies in the range of €8.65 billion to €8.95 billion. The company also forecasts cloud revenue at constant currencies to fall within the range of €14 billion to €14.2 billion.
Analysts’ Reactions
UBS analysts described the results as “very solid” and expect positive market reaction due to the strong performance in the cloud business and improving margins. On the other hand, analysts at Oppenheimer had a more mixed view, acknowledging management’s efforts to improve profit margins and free cash flow but maintaining a “Perform” rating due to a lack of perceived near-term catalysts.
In conclusion, SAP’s strong performance in its cloud business has driven revenue and operating profit growth. The company’s focus on expanding its cloud portfolio and improving gross margins has been well-received by analysts and investors alike.
