Bullish Thesis on SAP SE: Q2 Results, Cloud Growth, and Long-Term Potential

SAP SE's Q2 results reaffirmed its strong fundamentals despite market concerns. Cloud backlog rose 28% YoY to €18 billion, and cloud revenue reached €5.13 billion, up 28%. Total revenue grew 12%, operating profit rose 35% to €2.57 billion, and free cash flow surged 83% to €2.36 billion. The company's transition to higher-value cloud contracts and AI integration promise long-term potential, and operating leverage was a key highlight. Despite a premium P/E, SAP remains a core compounder with a powerful long-term growth trajectory.

SAP SE's Q2 2025 results have reaffirmed the company's robust financial health, despite broader market concerns. The company reported a significant increase in its cloud backlog, which rose by 28% year-over-year (YoY) to €18 billion. Cloud revenue also surged, reaching €5.13 billion, a 28% YoY increase. These figures underscore SAP's strong position in the cloud computing sector [1].

Total revenue grew by 12% YoY, with operating profit surging by 35% to €2.57 billion. Free cash flow also experienced a substantial increase, rising by 83% to €2.36 billion. These financial metrics highlight SAP's ability to generate significant value from its cloud and AI initiatives [1].

One of the key drivers behind SAP's strong performance is its transition to higher-value cloud contracts. This strategy has enabled the company to capture a larger share of the market and increase its revenue. Additionally, the integration of AI into its products has significantly enhanced customer workflows and boosted internal efficiency [1].

Despite these positive results, SAP's premium P/E ratio of 28x (as of July 2025) reflects investor caution due to market uncertainties. However, the company's long-term growth trajectory remains promising. SAP's focus on AI and cloud computing, coupled with its strategic partnerships and multi-cloud strategy, positions it well to capitalize on future market opportunities [1].

Moreover, SAP's strong operating leverage has been a key highlight of its Q2 results. This indicates the company's ability to generate significant profits from its existing operations, which is a positive sign for long-term investors [1].

In conclusion, SAP SE's Q2 2025 results demonstrate the company's strong fundamentals and its ability to navigate market challenges. With a robust cloud backlog, growing cloud revenue, and a strong focus on AI integration, SAP remains a core compounder with a powerful long-term growth trajectory. However, investors should continue to monitor the company's ability to convert its backlog into revenue and maintain its edge in a competitive market.

References:
[1] https://www.ainvest.com/news/assessing-sap-long-term-proposition-strategic-messaging-financial-visibility-q3-2025-2508/
[2] https://finance.yahoo.com/news/industrial-data-management-company-evaluation-123800201.html