SAP Q2 Earnings Beat Estimates, Revenue Surges

SAP SE reported Q2 non-IFRS EPS and revenue growth, surpassing Europe's most valuable company status globally. Baader Helvea expects SAP to confirm FY25 growth estimates, while Jefferies lowered its target for SAP to €290 with a "Buy" rating. SAP also announced partnerships with CData Software and BearingPoint for enhanced enterprise-grade embedded data connectivity and an integrated E-mobility platform, respectively.

SAP SE (NYSE:SAP), the German software giant, presented its second quarter 2025 financial results on July 22, revealing robust cloud revenue growth and significant profitability improvements. The company's shares traded slightly lower in after-hours trading, down 0.16% to $306.79, following a regular session close of $307.27. Despite this minor pullback, SAP's stock remains near its 52-week high of $313.28, reflecting strong investor confidence in the company's cloud transformation strategy [1].

Quarterly Performance Highlights

SAP reported impressive financial results for Q2 2025, with total revenue reaching €9,027 million, representing a 9% increase (12% at constant currency) compared to the same period last year. The company's cloud business continued to be the primary growth driver, with cloud revenue surging to €5,130 million, up 24% (28% at constant currency) [1].

Operating profit (non-IFRS) rose to €2,568 million, while free cash flow showed remarkable improvement at €2,357 million, representing an 83% year-over-year increase. Earnings per share also demonstrated strong growth, with basic EPS (IFRS) increasing by 91% to €1.45 and diluted EPS growing by 92% to €1.44 [1].

Cloud Business Momentum

SAP's cloud transformation continues to gain traction, with current cloud backlog reaching €18,052 million, up 22% (28% at constant currency) from the previous year. The Cloud ERP Suite, which includes S/4HANA Cloud, was particularly strong with revenue of €4,422 million, representing a 30% increase (34% at constant currency) [1].

Cloud gross profit (non-IFRS) improved to €3,856 million with a gross margin of 75.2%, showing continued efficiency improvements from 73.3% in Q2 2024. This margin expansion demonstrates SAP's ability to scale its cloud business profitably while transitioning customers from traditional software licenses [1].

Regional Performance

SAP reported strong growth across all geographic regions, with particularly impressive results in Asia-Pacific and Japan (APJ) and Europe, Middle East, and Africa (EMEA). Cloud revenue in APJ grew by 33% (37% at constant currency), while EMEA saw a 29% increase (30% at constant currency). The Americas region also performed well with 16% growth (22% at constant currency) in cloud revenue [1].

AI Innovation Strategy

A significant portion of SAP's presentation focused on the company's AI innovation strategy, which is driving business transformation across various functions. SAP highlighted its AI agents designed for specific roles such as CFO, CPO, COO, and others, delivering measurable efficiency improvements [1].

SAP also emphasized how Business AI is simplifying operations across engineering, sales and marketing, services, finance, and human resources, with quantifiable productivity improvements [1].

Forward-Looking Statements

SAP provided an optimistic outlook for the full year 2025, expecting cloud revenue to reach between €21.6 billion and €21.9 billion, representing 26% to 28% growth. Cloud and software revenue is projected to be between €33.1 billion and €33.6 billion, up 11% to 13%. Operating profit is expected to range from €10.3 billion to €10.6 billion, an increase of 26% to 30% [1].

Strategic Direction

SAP outlined its growth formula, focusing on four key pillars: Product Innovation, Go-to-Market strategy, Simplification, and People Transformation. This strategic framework is designed to accelerate growth through 2027 by reinventing business processes, enhancing customer journeys, improving operational efficiency, and developing a diverse workforce [1].

Partnerships and Future Growth

SAP also announced partnerships with CData Software and BearingPoint for enhanced enterprise-grade embedded data connectivity and an integrated E-mobility platform, respectively. These strategic alliances aim to strengthen SAP's position in the enterprise software market and drive future growth [1].

References:

[1] https://www.investing.com/news/company-news/sap-q2-2025-slides-cloud-revenue-surges-24-as-ai-innovations-drive-growth-93CH-4146851