SAP SE Reported Positive Increase in Expected Revenue

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SAP SE (SAP), the largest software company in Europe, has reported a significant expected revenue increase from cloud services in the next year. SAP's current cloud backlog, which is an indicator of revenue to be booked within the next 12 months, has increased by 28% at constant currencies to €14.2 billion ($15.2 billion). This represents the fastest growth on record for the Walldorf-based software giant, resulting in a surge in the company's stock price.

SAP has been focused on migrating its customers from legacy on-premise software to the cloud, where it offers business AI services to sweeten the deal. The company's cloud offering has generated growth in excess of 30% for nine quarters in a row, thanks in part to the growing trend of incorporating AI tools into virtually all of its products. The company has invested in startups Aleph Alpha GmbH, Anthropic PBC, and Cohere as part of its efforts to incorporate AI into its portfolio.

SAP's success in cloud technology and AI has put it ahead of its US software peers, which are experiencing slowing trends. The company's accelerating growth in the current cloud backlog highlights good demand across its cloud portfolio and demonstrates that the advent of AI has propelled the story of the transformation of the cloud, according to the company's Chief Financial Officer, Dominik Asam.

SAP's restructuring program, which was announced in January, has had a significant impact on the company's operating profit to International Financial Reporting Standards. The program resulted in a loss of €787 million for the period due to a €2.2 billion provision related to the restructuring program. The results are the company's first to include share-based compensation expenses in its non-IFRS report, which weighed on non-IFRS operating profit, resulting in €1.53 billion in the period, compared to estimates of €1.7 billion.

SAP's CEO, Christian Klein, expressed confidence that the company would achieve its goals for the year, citing the powerful growth drivers in place, which include business AI, cross-selling across the cloud portfolio, and winning new customers, particularly in the midmarket. Overall, the first quarter results show that SAP is off to a great start in 2024.