SAP Aims to Mitigate Tariff Impact with Cloud-Based ERP Suite and Hyperscaler Partnerships

SAP is relying on its hyperscaler partnerships to maintain cost stability amid tariff-induced economic uncertainty. The company's cloud-based enterprise software portfolio saw a 27% YoY revenue increase to nearly €5 billion ($5.7 billion), with cloud ERP accounting for 85% of the segment. SAP is committed to ending support for on-prem ERP systems by 2027, despite ongoing economic turbulence.

SAP (SAP) has demonstrated resilience in its first quarter earnings, with a 27% year-over-year (YoY) increase in cloud revenue to nearly €5 billion ($5.7 billion), driven by a 34% growth in cloud ERP suite revenue [1]. The company's strategic reliance on hyperscaler partnerships has been instrumental in maintaining cost stability amidst tariff-induced economic uncertainty.

SAP's CEO, Christian Klein, emphasized the importance of these partnerships, stating, "We have four hyperscalers plus our own converged cloud. We are not purchasing hardware directly—we are consuming it oftentimes via the hyperscalers where we have some kind of price security" [3]. This cost stability is crucial as the company continues to migrate customers to its cloud-based offerings, aiming to wind down support for on-premises ERP systems by 2027.

The company's cloud ERP suite accounted for 85% of the segment's revenue, showcasing its dominance in this area. Despite ongoing economic turbulence, SAP remains committed to its cloud transformation strategy. Klein noted that the business case for ERP modernization remains compelling, even in the face of macroeconomic challenges.

SAP's financial performance was bolstered by a 12% YoY increase in total revenue to €9.01 billion, with earnings per share (EPS) of €1.52, beating analysts' expectations [2]. The company's cloud backlog also grew by 29% at constant currencies, reflecting strong customer demand for its cloud solutions.

Looking ahead, SAP projects cloud revenue to be between €21.6 billion and €21.9 billion in 2025, with cloud and software revenue expected to increase by 11% to 13% [1]. The company's commitment to its cloud-first strategy is evident, with plans to update its RISE with SAP migration package to include a business transformation management toolkit and make it easier for customers to transition from private to public cloud within their existing contracts.

In summary, SAP's strategic reliance on hyperscaler partnerships and its commitment to cloud transformation have positioned the company well to navigate economic uncertainty. Its strong financial performance and projected growth demonstrate the resilience of its business model.

References:
[1] https://www.constellationr.com/blog-news/insights/sap-q1-solid-amid-uncertainty
[2] https://markets.businessinsider.com/news/stocks/sap-earnings-shares-jump-after-smashing-eps-estimates-1034609865
[3] https://www.ciodive.com/news/sap-cloud-erp-migration-costs-tariffs-revenue/746166/