SAP SE, Europe's leading enterprise software provider, delivered first-quarter results that surpassed analyst expectations, fueled by robust demand for its cloud solutions. The German software giant reported a 17% increase in operating profit to €2.74 billion and a 19% jump in cloud revenue to €5.96 billion, both exceeding consensus estimates tracked by Visible Alpha.
On a constant-currency basis, which strips out foreign exchange fluctuations, cloud revenue surged 27%. SAP's current cloud backlog—a key metric reflecting contracted cloud revenue for the coming 12 months—rose 20% to €21.93 billion, signaling sustained momentum in the company's transition to subscription-based offerings.
CEO Christian Klein attributed the outperformance to market share gains and strong demand for SAP's business suite and artificial intelligence capabilities. The company's Cloud ERP Suite revenue climbed 23% (30% in constant currencies), underscoring the traction of its next-generation enterprise resource planning solutions.
CFO Dominik Asam highlighted "disciplined execution" as a driver of the quarter's results, with adjusted operating margin expanding to 30.0% from 27.2% a year earlier. Adjusted earnings per share came in at €1.72, above the €1.59 consensus estimate.
However, the shift to cloud continued to weigh on legacy businesses. Software license revenue plunged 37%, while software support revenue declined 11%, reflecting the ongoing migration from on-premise deployments to cloud-based solutions.
Looking ahead, SAP maintained its full-year guidance, targeting cloud revenue of €25.8 billion to €26.2 billion and adjusted operating profit of €11.9 billion to €12.3 billion, both on a constant-currency basis. Management cautioned that cloud revenue growth will decelerate in the second quarter due to one-off factors that boosted Q1 results. The company also warned that a worsening situation in the Middle East could materially impact operations.
Free cash flow fell 9% to €3.25 billion, weighed down by a €408 million payment related to the Teradata litigation settlement. The company expects total revenue growth at constant currencies in 2026 to remain roughly in line with 2025, with acceleration expected in 2027.
SAP's U.S.-listed shares reversed earlier losses after the earnings release, climbing nearly 7% in after-hours trading. The stock had fallen 6.2% during regular trading amid broader pressure on software shares, driven by AI disruption concerns and deal delays tied to Middle East tensions. The positive reaction suggests investors are looking past near-term headwinds to focus on SAP's cloud transformation and AI-driven growth prospects.
