German enterprise software giant
is showing signs of acceleration in its push to shift its business to the cloud.
SAP (ticker: SAP) posted solid but complex results for the June quarter. Still, shares fell 4.5% to 116.88 euros ($137.59) in Wednesday’s premarket.
Revenue was €6.67 billion, up 1% from the year-ago quarter, or 3% higher adjusted for currency, and in line with the Wall Street analyst consensus forecast of €6.69 billion. SAP posted cloud revenue of 2.276 billion euros, up 11%, or 17% in constant currency, a smidgen below the Street consensus at €2.31 billion euros. Adjusted operating profit of €1.92 billion was in line with estimates.
SAP posted adjusted earnings of €1.75 per share, well above consensus at €1.21, aided by gains on the company’s investments in Sapphire Ventures, a fund associated with SAP. On a call with reporters late Tuesday, SAP said it had about €900 million in gains from Sapphire in the quarter, bringing gains for the full year to €1.3 billion.
SAP is in the process of shifting a substantial portion of its business to cloud versions of its flagship enterprise resource planning software and other related business applications. That has the effect of smoothing out revenue over the long run but reducing reported revenue in the near term. Revenue applications run on premise are generally recognized upfront, while cloud application revenue is recognized ratably over time.
SAP said cloud backlog in the quarter grew 20% at constant currencies, to €7.8 billion, a slight acceleration from 19% growth in the March quarter. The cloud backlog for the company’s flagship S/4 Hana ERP software jumped 48% to more than €1.1 billion, a pickup from 43% growth in the March quarter. SAP said it added more than 600 S/4 Hana cloud customers in the quarter, boosting the total to more than 17,000 customers, with more than 50% of the additions coming from new customers, rather than shifts of existing customers from older on-premise versions of the software.
The legacy software license business was down 16% year over year in the quarter, or down 13% in constant currency. Services revenue—also tied to the on-premise software business—was down 11%, or down 7% in constant currency.
SAP also said that it is seeing “first signs of recovery in travel and expense management with the easing of global travel restrictions,” resulting in stable quarter-over-quarter performance from the Concur expense management business for the first time since the start of the pandemic.
“We’re seeing strong adoption of our cloud portfolio as customers select SAP for their business transformation,” CEO
said. “Our strategy is working. This is the third straight quarter of strong execution, and we continue to deliver unparalleled customer value through the strength of our platform and applications.”
The company also said that as many countries began to reopen, SAP saw a positive impact on demand around the world.
SAP raised its full-year guidance, now seeing full-year cloud revenue ranging from €9.3 billion to €9.5 billion, compared with a previous guidance range of €9.2 billion to €9.5 billion.
The company sees cloud and software revenue of between €23.6 billion and €24 billion, up from a previous range of €23.4 billion to €23.8 billion. SAP now projects full year operating profit at constant currencies of €7.95 billion to €8.25 billion, up from a previous range of €7.8 billion to €8.2 billion.
Write to Eric J. Savitz at [email protected]