"SAP SE's Mixed Q4 2023 Earnings: Cloud Growth Surges Amidst Overall Revenue Challenges"
AInvestTuesday, Jan 23, 2024 7:52 pm ET
1min read

SAP SE, a global leader in enterprise software, presented a mixed bag of results for Q4 2023, with earnings falling short of expectations but revenues showing promising growth. The company reported earnings per share of €1.41, missing the estimated target by €0.18. However, SAP's revenue growth painted a brighter picture, escalating by 5.0% year-over-year to €8.47 billion, slightly higher than the projected €8.36 billion.

Looking ahead, SAP's FY24 guidance is optimistic, particularly in cloud revenue, which is expected to reach €17.0-17.3 billion at constant currencies. This projection indicates a robust increase of 24% to 27% compared to FY23. The company's cloud and software revenue forecast also shows promise, with an anticipated 8% to 10% rise to €29.0-29.5 billion. SAP's non-IFRS operating profit is projected to grow substantially by 17% to 21%, reaching between €7.6-7.9 billion. Despite these positive forecasts, SAP's expected free cash flow of approximately €3.5 billion includes considerations for significant payouts related to restructuring and impacts from regulatory compliance matters.

FY 2023 saw SAP outperform its non-IFRS operating profit and cash flow forecasts. The company's cloud revenue experienced substantial growth, up by 20% and even higher at 23% at constant currencies. Q4 was particularly strong for cloud revenue growth, soaring by 25%. The current cloud backlog also surged impressively to €13.7 billion, marking a 25% increase.

SAP's Q4 performance demonstrated robust growth in cloud backlog and revenue, higher cloud gross margins, and a shift towards more predictable revenue streams. FY 2023's full-year results revealed a 20% growth in cloud revenue to €13.66 billion and a 23% increase at constant currencies. However, the software licenses segment witnessed a 14% decrease in revenue. Overall, the cloud and software segment grew by 6%, reaching €26.93 billion, and services revenue saw a 4% increase.

Despite these positive indicators, SAP's full-year financials showed a decline in IFRS operating profit by 5% to €5.79 billion, along with a decrease in IFRS operating margin to 18.5%. In contrast, non-IFRS operating profit increased by 9% to €8.72 billion, with a non-IFRS operating margin improvement.

SAP SE's Q4 and FY 2023 results reflect a complex scenario where cloud growth and operational efficiency gains balance the challenges in software license revenues and overall profitability. As the company navigates the evolving digital landscape, these results offer insights into its strategic focus and potential trajectory in the rapidly changing global enterprise software market.


Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.