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SAP beats Q1 expectations with strong cloud revenue surge

Written by Mon 29 Apr 2024

German software maker, SAP, has reported a 24% increase in Q1 cloud revenue to £3.3 billion ($4.19 billion) due to demand for enterprise resource planning (ERP) software.

ERP software is implemented by companies to manage business operations like supply chain management and accounting, catering mostly to business clients. 

The company exceeded Wall Street expectations with software revenue totalling £2.5 billion ($3.2 billion), slightly surpassing the forecasted £2.5 billion ($3.2 billion). SAP also noted a 27% increase in cloud backlog from the previous year, reaching £12.1 billion ($15.2 billion). Cloud backlog indicates anticipated revenue from cloud services within the next 12 months.

However, the company reported an operating loss of £673 million ($843 million), attributed to a £1.8 billion ($2.3 billion) provision for share-based compensation expenses. Excluding this provision, profit would have amounted to £1.3 billion ($1.6 billion), falling short of the expected £1.4 billion ($1.8 billion).

In January, SAP committed to invest £1.7 billion ($2.1 billion) in a restructuring initiative. This programme was forecasted to impact 8,000 jobs, aiming to either upskill employees with artificial intelligence (AI)  proficiency or facilitate voluntary redundancies.

SAP Forecasts 2024 Goals

SiliconANGLE reported Chief Executive at SAP, Christian Klein, said the company has begun well for fiscal 2024, stating he was confident the company will reach its goals for the year. 

“Looking ahead, we have powerful growth drivers in place with business AI, cross-selling across our cloud portfolio, and we are winning new customers, particularly in the midmarket,” said Klein.

SAP said it anticipates cloud revenue to range between £14.5 billion ($18.2 billion) and £14.7 billion ($18.5 billion), marking a growth of 24% to 27% for 2024. 

The software company said it also forecasts combined sales from both cloud and software to reach £24.7 billion ($31 billion) to £25.2 billion ($31.6 billion), representing an increase of 8% to 10%. Adjusted profit for the year is expected to fall within the range of £6.4 billion ($8.1 billion) to £6.7 billion ($8.4 billion).

SAP plans for a compounded average revenue growth rate of 10% until 2025 and intends to accelerate growth beyond that point.

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Written by Mon 29 Apr 2024

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