SAP Cloud Revenue Meets Estimate as AI Adoption Fuels Demand
(Bloomberg) — SAP SE reported first-quarter cloud revenue in line with analysts, as a boom in demand for artificial intelligence fueled the German software company’s growth.
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Adjusted cloud revenue in the quarter rose 25% at constant currencies from a year earlier to €3.9 billion ($4.2 billion), the Walldorf-based company said in a statement Monday. That compares with the average estimate of €3.9 billion of analysts surveyed by Bloomberg.
Europe’s biggest software firm has been seeking to migrate customers from its legacy on-premise software to the cloud, where it is offering business AI services to sweeten the deal. This year, SAP announced discounts of as much as 50% to existing clients to accelerate the shift to subscription models that lead to higher average spending per client.
“We’re off to a great start in 2024 and we’re confident we’ll achieve our goals for the year,” Chief Executive Officer Christian Klein said in the statement. “Looking ahead, we have powerful growth drivers in place – Business AI, cross-selling across our cloud portfolio, and winning new customers particularly in the midmarket.”
Read More: SAP Sees AI as Shortcut to Faster Cloud Revenue Growth
The company has joined an industrywide trend to incorporate AI tools into virtually all of its products. As part of this push, SAP has invested in startups Aleph Alpha GmbH, Anthropic PBC and Cohere.
SAP’s American depositary receipts were little changed in extended trading after rising 1.4% to $178.18 at the close in New York. The shares have gained 15% so far this year.
SAP’s current cloud backlog — an indicator of cloud revenue to be booked within next 12 months — grew by 28% at constant currencies to €14.2 billion, the fastest growth on record, it said.
SAP announced a restructuring program in January amid greater focus on growth areas such as cloud technology and AI. The company’s operating profit to International Financial Reporting Standards was impacted by a €2.2 billion provision related to the program, resulting in a loss of €787 million for the period.
The results are SAP’s first to include share-based compensation expenses in its non-IFRS report. This weighed on non-IFRS operating profit, which was €1.53 billion in the period, compared to estimates of €1.7 billion.
(Updates with details throughout.)
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