SAP's Q1 2025 Earnings Call: Navigating Contradictions in Cloud Growth, Large Deals, and Geopolitical Risks

Impact of macroeconomic uncertainty on cloud revenue growth, large deals trend and sustainability, impact of tariffs on cloud gross margins, impact of geopolitical risks on cloud revenue growth, and transition to cloud and AI integration are the key contradictions discussed in SAP's latest 2025Q1 earnings call.



Revenue and Cloud Backlog Expansion:
- SAP's cloud backlog increased 29% to €18.2 billion in Q1 2025.
- Quarterly cloud revenue is now nearing the €5 billion mark, seeing a 26% increase.
- Growth was driven by SAP's transformation and the resilience of its business model, as well as strong demand for cloud solutions amidst macroeconomic uncertainty.

Operating Profit and Margin Improvements:
- Operating profit rose by 58% in Q1, with a cloud gross margin improvement of 2.6 percentage points to 75%.
- This improvement was due to disciplined execution and operational efficiencies stemming from SAP's transformation program.

Regional Performance and Market Momentum:
- In Q1, SAP's cloud revenue performance was particularly strong in APJ and EMEA regions, with robust performance in the Americas.
- Strong performances were observed in countries like Germany, India, Italy, and South Korea, contributing to SAP's global market leadership.

Product Innovation and AI Adoption:
- The introduction of SAP Business Data Cloud has shown significant momentum, with a pipeline building up well for future quarters.
- The integration of AI and data analytics capabilities, along with strategic partnerships, enhances SAP's product offerings and market relevance, particularly in managing regulatory and global trade complexities.