SAP will be the most surge after 6 years of profit beat estimate
SAP SE won the most in six years when Europe’s most valuable companies reported first-quarter profits above analyst estimates supported by pivots to cloud services.
Operating profit rose 58% in certain currencies to 2.5 billion euros ($2.9 billion), according to Germany-based Walldorf. This is compared to an average estimated 2.24 billion euros compiled by analysts, compiled by Bloomberg.
SAP shares rose 11% in Frankfurt, the largest daytime jump since April 24, 2019. Last year, the stock price rose 36%, and its value overturned Novo Nordisk A/S and LVMH in March.
SAP’s enterprise resource planning software (used for bookkeeping, procurement and HR) typically requires you to register with a contract and lock it into a stable revenue stream. Approximately 86% of SAP’s revenues came from repeated revenues from the previous quarter, which helped quarantine SAP from the fear of economic upheaval and the US recession, CEO Christian Klein said in an interview with Bloomberg Television.
“Customers need to focus on real cost savings. SAP has the strength and resilience despite the peak of macro uncertainty,” they said, Deutsche Bank analysts, including Gianmarco Conti.
Revenues for a certain currency cloud rose between 26% and 49.9 billion euros, compared to estimates of 5.05 billion euros. SAP confirmed its cloud revenue outlook for 2025 to 21.9 billion euros from 21.6 billion euros. Still, the company said, “a typical dynamic environment means an increased level of uncertainty and a reduced visibility.”
The current cloud backlog, reflecting sales being reserved over the next 12 months, has increased 29% in certain currencies to 18.2 billion euros.
SAP also launched an overhaul of companies with job cuts in early 2024, helping to strengthen profits.
Profits came in a positive global context after President Donald Trump suggested that he might retreat from a tough trade stance on Beijing. The wider gauge of Asian stocks rose by more than 1%.
SAP is not directly affected by US tariffs, but its customers may already be responding to economic uncertainty. Growth in both the licensing and cloud subscription businesses slowed in the first quarter, according to a survey this month of 30 SAP resellers conducted by Morgan Stanley analysts. The slowdown was driven primarily by the largest market, the United States.
What Bloomberg Intelligence says:
SAP’s adjusted operating margin is 27.2%, with consensus on roughly 250 bps, showing that the aggressive cloud over the past two to three years has matured, covering up slight mistakes in improving sales. In addition to reaffirming its target for 2025, the current cloud backlog growth of 29% in certain currencies shows little indication of obstacles due to increasing uncertainty. – BI Analyst Anurag Rana and Andrew Girard
“We’re seeing a very strong pipeline in the US,” Klein said despite concerns about the recession. “What we haven’t seen yet is that they’re delaying projects or cutting projects.”
Klein prioritizes the company’s shift to a subscription-based cloud business model where average spending per client is high. Under his leadership, the company strongly promotes artificial intelligence business services in the cloud and encourages its customers to switch from servers on legacy.
Competing with Salesforce Inc., SAP is less affected by US trade barriers than other European technology giants. ASML Holding NV, which had been the continent’s most valuable tech company until October, reported a first-quarter order last week, which was nearly 1 billion euros below forecast, warning that the impact of the recent tariff announcement remains unknown.
This story was originally introduced Fortune.com