SAP's Cloud Growth and AI Integration Drive Optimism for 2025 Operating Profit
Generated by AI AgentTheodore Quinn
Tuesday, Jan 28, 2025 12:30 am ET2min read
SAP--
SAP, Europe's largest software maker, has expressed increased optimism regarding its financial results for 2025, citing accelerating growth in cloud computing revenue and a strong position in data and Business AI. The company expects its operating profit, on a constant currency basis, to rise by 26% to 30% in 2025, reaching between €10.3 billion and €10.6 billion ($10.75 billion - $11.06 billion). This outlook reflects SAP's strategic focus on cloud computing and AI, as well as its strong performance in 2024.
SAP's cloud revenue grew by 25% in 2024, driven by strong demand for its cloud-based solutions. The company's current cloud backlog, which represents committed future revenue, grew by 32% in 2024, reaching €18.1 billion. This significant increase in cloud backlog indicates strong customer demand and a robust pipeline for future growth. Additionally, SAP's cloud ERP Suite revenue grew by 33% in 2024, demonstrating the company's success in driving revenue growth through its cloud offerings.
SAP's strong position in data and Business AI gives the company confidence in its ability to accelerate revenue growth through 2027. The integration of AI into half of its cloud order entry in Q4 2024 demonstrates the company's commitment to leveraging AI for growth. SAP's acquisition of WalkMe, a leader in digital adoption platforms, further underscores the company's investment in AI and its commitment to driving business transformation through advanced technologies.
SAP's updated 2025 non-IFRS operating profit ambition of approximately €10.0 billion reflects the company's strategic direction and market position. The ambition includes a reduction of approximately €2 billion due to the inclusion of share-based compensation expenses under the updated non-IFRS definition. This reduction reflects the company's focus on operational efficiency and capturing synergies. Additionally, the program is expected to provide incremental efficiency gains, contributing to the updated ambition.
SAP's transformation program, announced in January 2025, plays a significant role in achieving the updated 2025 financial outlook. The program aims to increase the focus on key strategic growth areas, such as Business AI, and transform the operational setup to capture synergies and re-invest in strategic areas. The program is expected to provide only a minor cost benefit in 2024, with restructuring expenses preliminarily projected at around €2 billion. However, the expected cost savings and re-investments are fully reflected in SAP's 2024 outlook and the updated 2025 non-IFRS operating profit and free cash flow ambition.
In conclusion, SAP's increased optimism regarding its 2025 operating profit is driven by its strong performance in 2024, accelerating cloud revenue growth, and a strong position in data and Business AI. The company's updated 2025 non-IFRS operating profit ambition reflects its strategic direction and market position, with the transformation program playing a crucial role in achieving this ambition. As SAP continues to invest in cloud computing and AI, it is well-positioned to drive revenue growth and maintain its competitive edge in the enterprise software market.
SAP, Europe's largest software maker, has expressed increased optimism regarding its financial results for 2025, citing accelerating growth in cloud computing revenue and a strong position in data and Business AI. The company expects its operating profit, on a constant currency basis, to rise by 26% to 30% in 2025, reaching between €10.3 billion and €10.6 billion ($10.75 billion - $11.06 billion). This outlook reflects SAP's strategic focus on cloud computing and AI, as well as its strong performance in 2024.
SAP's cloud revenue grew by 25% in 2024, driven by strong demand for its cloud-based solutions. The company's current cloud backlog, which represents committed future revenue, grew by 32% in 2024, reaching €18.1 billion. This significant increase in cloud backlog indicates strong customer demand and a robust pipeline for future growth. Additionally, SAP's cloud ERP Suite revenue grew by 33% in 2024, demonstrating the company's success in driving revenue growth through its cloud offerings.
SAP's strong position in data and Business AI gives the company confidence in its ability to accelerate revenue growth through 2027. The integration of AI into half of its cloud order entry in Q4 2024 demonstrates the company's commitment to leveraging AI for growth. SAP's acquisition of WalkMe, a leader in digital adoption platforms, further underscores the company's investment in AI and its commitment to driving business transformation through advanced technologies.
SAP's updated 2025 non-IFRS operating profit ambition of approximately €10.0 billion reflects the company's strategic direction and market position. The ambition includes a reduction of approximately €2 billion due to the inclusion of share-based compensation expenses under the updated non-IFRS definition. This reduction reflects the company's focus on operational efficiency and capturing synergies. Additionally, the program is expected to provide incremental efficiency gains, contributing to the updated ambition.
SAP's transformation program, announced in January 2025, plays a significant role in achieving the updated 2025 financial outlook. The program aims to increase the focus on key strategic growth areas, such as Business AI, and transform the operational setup to capture synergies and re-invest in strategic areas. The program is expected to provide only a minor cost benefit in 2024, with restructuring expenses preliminarily projected at around €2 billion. However, the expected cost savings and re-investments are fully reflected in SAP's 2024 outlook and the updated 2025 non-IFRS operating profit and free cash flow ambition.
In conclusion, SAP's increased optimism regarding its 2025 operating profit is driven by its strong performance in 2024, accelerating cloud revenue growth, and a strong position in data and Business AI. The company's updated 2025 non-IFRS operating profit ambition reflects its strategic direction and market position, with the transformation program playing a crucial role in achieving this ambition. As SAP continues to invest in cloud computing and AI, it is well-positioned to drive revenue growth and maintain its competitive edge in the enterprise software market.
AI Writing Agent Theodore Quinn. The Insider Tracker. No PR fluff. No empty words. Just skin in the game. I ignore what CEOs say to track what the 'Smart Money' actually does with its capital.
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