German enterprise software giant
is showing signs of acceleration in its drive to move its business to the cloud.
SAP (ticker: SAP) posted solid but complex June quarter results. Still, Wednesday’s premarket shares fell 4.5% to Euro 116.88 ($137.59).
turnover was €6.67 billion, up 1% from the same quarter a year ago, or 3% higher when adjusted for currencies, and in line with Wall Street analysts’ consensus forecast of €6.69 billion. SAP posted cloud revenues of €2.276 billion, an increase of 11% or 17% in constant currency, a smidgen below the Street consensus on €2.31 billion euros. Adjusted operating profit of €1.92 billion was in line with estimates.
SAP posted adjusted profit of €1.75 per share, well above consensus at €1.21, aided by gains on the company’s investments in Sapphire Ventures, an SAP affiliate fund. Speaking to reporters late Tuesday, SAP said it was about €900 million in profit from Sapphire in the quarter, boosting full year profit €1.3 billion.
SAP is moving a significant portion of its business to cloud versions of its flagship enterprise resource planning software and other related business applications. As a result, long-term earnings are flattened, but short-term reported earnings are reduced. Revenue from applications running on-premise is generally recognized upfront, while revenue from cloud applications is recognized over time.
SAP said cloud backlog grew 20% in the quarter at constant currencies, up to €7.8 billion, slightly accelerating from 19% growth in the March quarter. The cloud backlog for the company’s flagship S/4 Hana ERP software rose 48% to over $1.1 billion, up from 43% growth in the March quarter. SAP said it added more than 600 S/4 Hana cloud customers in the quarter, raising the total to more than 17,000 customers, with more than 50% of the additions coming from new customers, rather than shifts from existing ones. customers of older on-premises customer versions of the software.
Legacy software licensing business was down 16% year-over-year in the quarter, or 13% in constant currency. Revenue from services – also linked to the on-premise software activities – decreased by 11%, or by 7% in constant currency.
SAP also said it sees “first signs of recovery in travel and expense management with the easing of global travel restrictions,” resulting in stable quarter-over-quarter performance of Concur’s expense management business for the first time since the start of the pandemic.
“We are seeing strong adoption of our cloud portfolio as customers choose SAP for their business transformation,” said CEO Christian Klein. “Our strategy is working. This is the third consecutive quarter of strong execution and we continue to deliver unparalleled customer value through the power of our platform and applications.”
The company also said that as many countries began to reopen, SAP saw a positive impact on demand around the world.
SAP raised its full-year expectations and now sees full-year cloud revenue ranging from €9.3 billion to €9.5 billion, compared to a previous bandwidth of €9.2 billion to €9.5 billion.
The company sees cloud and software revenues between $23.6 billion and $24 billion, up from a previous bandwidth of $23.4 billion to $23.8 billion. SAP now projects full-year operating profit at constant currency of €7.95 billion to €8.25 billion, up from a previous range of €7.8 billion to €8.2 billion.
Write to Eric J. Savitz at firstname.lastname@example.org