"Europe's largest company" skyrocketed after earnings report, SAP "as solid as a rock"

SAP delivered a first-quarter report that caught the market's attention, with profits significantly exceeding analyst expectations, and the stock price surged by 11%, marking the largest single-day increase in six years.

Among them, cloud business revenue, as a key indicator for SAP, grew strongly by 26%, reaching €4.99 billion. The potential for future backlog orders is enormous. The company stated, "The current dynamic environment means increased uncertainty and reduced visibility."

On the 23rd, SAP announced its first-quarter financial report, which showed:

• Revenue: The company's total income reached €9.013 billion, an 11% year-on-year growth at constant exchange rates, but slightly below the market expectation of €9.104 billion, partly due to exchange rate impacts.
• Operating profit: €2.3 billion, reversing an operating loss of €787 million in the same period of 2024.
• Gross margin: Increased by 180 basis points year-on-year to 73.6%. The gross margin for cloud business increased by 250 basis points to 75.0%.
• Adjusted earnings per share: Increased by 79% year-on-year to €1.44.

Driven by this news, SAP's stock price rose by 11% on Wednesday, marking the largest intraday increase since April 24, 2019. Over the past year, SAP's stock price has accumulated a 36% increase, and its market capitalization surpassed Novo Nordisk and Louis Vuitton in March, becoming the highest-valued company in Europe.

SAP's cloud business grows strongly by 26%, with significant potential in future backlog orders

At constant exchange rates, SAP's cloud business revenue grew by 26%, reaching €4.99 billion, slightly below the analyst expectation of €5.05 billion. SAP confirmed its 2025 cloud business revenue expectation to be between €21.6 billion and €21.9 billion. At the same time, the company stated, "The current dynamic environment means increased uncertainty and reduced visibility."

Current cloud backlog orders (reflecting sales to be recognized in the next 12 months) grew by 29% at constant exchange rates, reaching €18.2 billion, indicating strong future growth potential.

CEO Christian Klein stated:

"The first quarter once again proves that our successful formula is working. At constant exchange rates, current cloud backlog orders expanded by 29%, and total revenue achieved double-digit growth."

Bloomberg analysts Anurag Rana and Andrew Girard commented:

"SAP's adjusted operating profit margin reached 27.2%, about 250 basis points higher than consensus, indicating that its aggressive cloud transformation over the past 2-3 years is maturing, which masks slight shortcomings in sales growth. Current cloud backlog orders grew by 29% at constant exchange rates, along with the reaffirmation of the 2025 target, showing almost no hindrance from rising uncertainty."

Mission-critical software from SAP meets customer needs, demonstrating resilience amid macro uncertainty

Deutsche Bank analyst Gianmarco Conti and others wrote in a report: "Customers turn to SAP for genuine cost savings, and the mission-critical nature of SAP's software clearly meets this demand." They noted that SAP demonstrates strength and resilience even when "macro uncertainty reaches its peak."

Citigroup analysts stated that SAP's robust first-quarter performance "reflects resilient revenue and backlog growth, as well as strict execution in terms of costs and cash."

Management emphasized that while the project pipeline remains healthy, ongoing uncertainty may impact conversion rates, and achieving the upper limit of guidance requires a swift resolution of trade disputes. At the same time, the company clearly stated that the guidance does not assume a scenario of severe recession due to tariffs.

Regarding cost control, the company remains vigilant, noting that hiring plans will focus on the second half of the year to observe how the macroeconomic situation develops, allowing SAP to maintain flexibility in adjusting the hiring of thousands of employees.

" SAP continues to be relatively unaffected by the challenging macroeconomic environment; we believe management has considered prudent factors in maintaining its unchanged 2025 outlook," Citigroup analysts added, reiterating that SAP is their preferred choice in the EU software and services sector