Jan 28, 2025
•7 minute read
financial results
SAP Announces Leadership Changes Alongside Strong 2024SAP's FY2024 earnings call revealed a strong financial performance alongside significant leadership changes, including the appointment of Sebastian Steinhaeuser as Chief Operating Officer, while also confirming a focus on AI integration and strategies aimed at enhancing cloud growth.
SAP Raises 2024 Revenue Outlook After Strong Q3Following a strong second quarter performance that saw current cloud backlog increase by 28% and Cloud ERP Suite revenue increase by 33%, SAP announced and even stronger third quarter performance. Current cloud backlog increased 27% at constant currencies to €15.4 billion while total revenue was up 10% at constant currencies to €8.5 billion. Once again cloud revenue, which increased by 27% at constant currencies to nearly €4.4 billion, accounted for more than half of total revenue and 59% of cloud and software revenue.
This performance was strong enough for SAP to raise their full year outlook for 2024 for cloud and software revenue, operating profit, and free cash flow. Cloud and software revenue is now expected to be between €29.5 and €29.8 billion, raising the midpoint by €400 million. Non-IFRS operating profit is now expected to be between €7.8 and €8.0 billion, up from €7.6 to €7.9 billion. And free cash flow is expected to be between €3.5 and €4.0 billion, while the previous outlook was €3.5 billion.
As has been the case for several quarters, there were no specific adoption numbers mentioned in the third quarter earnings call. However, Klein did mention on multiple occasions that only a quarter of customers have started their transformation journey to SAP S/4HANA. Taking into consideration that around half of all SAP S/4HANA customers are net new and that there are approximately 25,000 customers who have licensed the offering, this means that over 35,000 customers are still to make any move off their existing SAP ECC, SAP Business Suite, or even SAP R/3 deployment.
Regardless of the direction they take, SAPinsiders must be prepared for the future. Whether this involves an eventual move to RISE with SAP, remaining on their existing environment, or even a move to a new ERP system from a different vendor, the more that organizations can do now the easier any future project will become. What is clear is that SAP is not extending mainstream maintenance beyond 2027 and their focus is on customers completing the transformation to RISE with SAP.
Oct 22, 2024
•5 minute read
Cloud Revenue and AI Powers SAP to Strong Q2SAP continued their strong performance in the first quarter with an equally robust performance in the second quarter of 2024. The current cloud backlog increased by 28% to €14.8 billion at constant currencies. Currently cloud backlog is defined as the contractually committed cloud revenue that SAP expects to recognize over the upcoming 12 months based on existing cloud subscription contracts. Cloud revenue was up 25% to €4.1 billion, and Cloud ERP Suite revenue increased 33% to €3.4 billion, making up the bulk of cloud revenue.
Considering SAP’s efforts to restructure and integrate business AI across its entire suite of solutions, it is no surprise that CEO Christian Klein emphasized this during his opening remarks on the earnings call. A significant point for Klein was that AI strategy played a key role across the company, and that almost 20% of all deals in the second quarter included premium AI use cases. While Klein was unclear on the methodology for measuring premium AI use cases, or the associated product portfolio components that benefited from this impact, he highlighted that SAP’s AI investments are already helping drive revenue.
The earning call did not mention either SAP S/4HANA or RISE with SAP adoption numbers. At Sapphire, SAP’s Chief Revenue Office, Scott Russell, indicated that there were 6,000 customers running RISE with SAP. Neither Klein nor Asam provided an updated figure although Klein highlighted that almost 1,500 customers were now running GROW with SAP, an offering targeted at small or medium-sized enterprises or those not already running an SAP ERP solution. GROW with SAP is tied exclusively to SAP S/4HANA Cloud Public Edition, but the contracts and bundling are mostly identical to RISE with SAP.
While organizations are increasingly using GROW with SAP, 60% of the customers licensing the solution this quarter were net new. This is understandable considering that GROW with SAP is designed for customers who are not using an SAP ERP or want to use a new implementation in a multi-tenant public cloud environment. In fact, Klein highlighted that GROW with SAP is ideally suited for greenfield deployments, net new customers, or subsidiaries of organizations already using SAP S/4HANA or RISE with SAP.
SAPinsiders must be prepared for a cloud-based future if they want to continue using SAP solutions. While not all organizations have moved their SAP workloads to the cloud, SAP’s ongoing improvements and functionalities are centered here. Failing to prepare for this shift, whether it involves moving to a different ERP provider or a third-party support service, could result in significant cost and complexity.
Jul 24, 2024
•6 minute read
Events
SAPinsider Summit New Orleans 2026New Orleans, Louisiana, United States
SAPinsider Summit Chicago 2026Chicago, IL
SAPinsider Copenhagen 2026Copenhagen, Denmark
Mastering SAP Collaborate, an SAP TechEd on Tour eventSydney, New South Wales, Australia
