SAP SE (ETR:SAP) saw its shares climb sharply on Friday, gaining 6.25% to €136.34, as the market focused on a robust cloud backlog performance despite a downward revision to the company's full-year profit guidance. The rally added approximately €9.9 billion to SAP's market capitalization, based on a share price increase of €8.02 and 1.23 billion outstanding shares.
The cloud backlog, which represents contracted cloud revenue expected over the next 12 months, reached €22.93 billion, marking a 26% increase at constant currencies. This surpassed the market consensus of 24% growth, providing a strong forward revenue signal that investors seized upon during the Xetra trading session, which is set to conclude at 17:30 CEST.
While cloud revenue for the second quarter of 2026 came in at €6.281 billion, slightly above the consensus estimate of €6.255 billion, the non-IFRS operating profit of €2.743 billion fell short of expectations by €139 million, or 4.8%. The company's free cash flow also missed projections, coming in at €3.002 billion against an expected €3.049 billion, a shortfall of 1.5%.
Despite these earnings misses, SAP maintained its cloud revenue forecast for the full year at €25.8 billion to €26.2 billion and reaffirmed its free cash flow outlook of approximately €10 billion. However, the company lowered the midpoint of its non-IFRS operating profit forecast by €100 million to a range of €11.8 billion to €12.2 billion, down from the previous range of €11.9 billion to €12.3 billion. SAP attributed this revision solely to mergers and acquisitions, specifically citing the expected impact from Dremio and Prior Labs, which are projected to reduce 2026 profit by over €100 million.
Chief Financial Officer Dominik Asam stated that the profit guidance cut was “driven solely by mergers and acquisitions,” while Chief Executive Christian Klein noted that customers are increasingly seeking “accurate and compliant AI outcomes.” Asam further highlighted that over 90% of SAP’s 50 largest deals in the quarter included AI components.
The cloud backlog beat was not significantly influenced by acquisitions; Reltio contributed less than one percentage point to the backlog growth, indicating that organic core growth remained above 25%. Cloud ERP Suite revenue rose 27% at constant currencies to €5.53 billion, while software license revenue declined 32% to €131 million, reflecting the ongoing shift from upfront licenses to subscription-based models.
Despite Friday’s strong performance, SAP shares remain approximately 47% below their 52-week high of €258.70. The stock’s advance outpaced the 1.4% gain in European technology stocks and contributed to a rise in Germany’s DAX index. However, risks persist: software support revenue declined 7% at constant currencies, and SAP’s forecast assumes a short-term easing of tensions in the Middle East. Additionally, using exchange rates as of June 30 would reduce projected full-year cloud growth by 1.5 percentage points and operating profit growth by two percentage points.
