HSBC sees 5% revenue growth in 2028 compared with 27

HSBC sees 5% revenue growth in 2028 compared with 27

HSBC Assesses SAP’s Cloud Migration Pace, Flags 5% Annual Revenue Growth Potential Through 2028

HSBC has initiated coverage of SAP (NYSE: SAP) with a “Hold” rating, citing that the stock’s current valuation already reflects the software company’s strong fundamentals and cloud-driven growth prospects, leaving limited upside relative to consensus expectations according to the bank's analysis. The bank set a target price of €178, below SAP’s current trading level of €194, signaling caution despite the company’s market leadership in enterprise resource planning (ERP) solutions.

HSBC’s analysis highlights SAP’s projected revenue growth, driven by the ongoing migration of on-premise customers to cloud-based solutions. The bank estimates approximately 5% of SAP's on-premise customer base by revenue will transition to the cloud annually through 2028, up from 4.5% annually between 2022 and 2025. This migration, HSBC notes, typically generates a revenue uplift of 2.5 times for SAP compared to on-premise contracts. However, the bank cautions that 60% of SAP’s on-premise clients remain unconverted, with maintenance fee increases beginning in 2027 and end-of-support deadlines by 2030 creating long-term uncertainty.

While SAP’s cloud backlog growth has been subdued, HSBC anticipates clearer trends following fourth-quarter 2025 results. The bank also identifies risks, including potential overestimation of migration speeds and revenue gains, as well as competitive pressures from partnerships like ServiceNow and Rimini Street, which could delay cloud upgrades for some clients according to the bank's assessment. Upside scenarios include accelerated cloud adoption or stronger performance from SAP’s AI-driven initiatives, while downside risks stem from third-party maintenance alternatives and AI-driven competition.

HSBC forecasts SAP’s revenue to grow at a compound annual rate of 9.6% from 2025 to 2028, underscoring the need for investors to monitor migration timelines and margin dynamics closely.