SAP Cloud Revenue Surges, China Expansion Fuels Dividend Stability

SAP SE (NYSE:SAP) reported a 28% increase in cloud revenue and a 35% rise in operating profit in Q2 2025. The company attributes this growth to strong performance in Cloud ERP Suite and strategic partnerships, including with Alibaba, expanding its business operations in China. SAP offers a $2.63 annual dividend with a consensus Buy rating from 16 analysts, indicating a strong 1-year median upside potential of 25.41%.

SAP SE (NYSE:SAP) announced a robust Q2 2025, with a 28% increase in cloud revenue and a 35% rise in operating profit. The company attributed this growth to strong performance in its Cloud ERP Suite and strategic partnerships, notably with Alibaba, which is expanding its business operations in China. This financial performance underscores SAP's ability to navigate market concerns and capitalize on long-term growth opportunities.

The company's cloud revenue reached €5.13 billion, up 28% year-over-year, driven by the Cloud ERP suite, which grew by 34% to €4.42 billion. Total revenue increased by 12%, and operating profit surged to €2.57 billion, while free cash flow jumped 83% to €2.36 billion. The company's earnings per share (EPS) also beat expectations at €1.50.

SAP's strategic partnership with Alibaba is anticipated to further bolster its business in China, supporting a strong pipeline for the second half of 2025. The partnership aligns with China's accelerating drive to replace foreign AI chips with domestic alternatives, as highlighted by Alibaba's development of a new AI chip capable of handling a wider range of inference tasks.

SAP SE is one of the 11 Best Annual Dividend Stocks to Buy According to Hedge Funds, offering a $2.63 annual dividend per share. The stock has a consensus Buy rating from 16 analysts, with a strong 1-year median upside potential of 25.41%.

Despite near-term volatility risks, SAP remains a core compounder with a powerful long-term growth trajectory that the market continues to underestimate. The company's deep structural advantages, durable growth drivers, and compounding free cash flow potential support a double-digit IRR outlook. However, certain AI stocks are perceived to offer greater upside potential and carry less downside risk.

References:

[1] https://finance.yahoo.com/news/sap-se-sap-bull-case-090836460.html
[2] https://finance.yahoo.com/news/sap-cloud-revenue-surge-china-060653506.html
[3] https://www.techspot.com/news/109266-china-accelerates-drive-replace-nvidia-alibaba-metax-huawei.html