Home Substantial portion SAP’s earnings were solid. The stock is down.

SAP’s earnings were solid. The stock is down.

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Shares of SAP are up 10.5% this year and down 12.4% in the past 12 months.

Alex Kraus / Bloomberg

German enterprise software giant

SAP

is showing signs of acceleration in its desire to migrate its activity to the cloud.

SAP (ticker: SAP) reported strong but complex results for the June quarter. Still, shares fell 4.5% to 116.88 euros ($ 137.59) in Wednesday’s pre-trade.

The turnover was $ 6.67 billion, up 1% year-over-year, or 3% more currency adjusted, and in line with Wall Street analyst consensus forecast of 6.69 billion. SAP reported cloud revenue of € 2.276 billion, up 11%, or 17% in constant currency, slightly below Street’s consensus at 2.31 billion euros. Adjusted operating profit of 1.92 billion was in line with estimates.

SAP published an adjusted result of 1.75 per share, well above the consensus at 1.21, helped by gains on the company’s investments in Sapphire Ventures, a fund associated with SAP. In a call with reporters Tuesday night, SAP said he had about Sapphire’s 900 million earnings in the quarter, bringing earnings for the full year to 1.3 billion.

SAP is moving a substantial part of its business to cloud versions of its flagship enterprise resource planning software and other related business applications. This has the effect of smoothing income over the long term but reducing reported income in the short term. Revenue applications running on-premises are generally recognized in advance, while cloud application revenue is prorated over time.

SAP said the cloud backlog in the quarter increased 20% at constant currencies, to reach $ 7.8 billion, a slight acceleration from the 19% growth in the March quarter. The cloud backlog for the company’s flagship ERP software, S / 4 Hana, jumped 48% to more than € 1.1 billion, up from 43% growth in the March quarter. SAP said it added more than 600 S / 4 Hana cloud customers during the quarter, bringing the total to more than 17,000 customers, with more than 50% of the additions coming from new customers, rather than transfers from existing customers from alumni on site. software versions.

Legacy software licensing activity was down 16% year-on-year in the quarter, or 13% at constant currency. Service revenue, also linked to the on-premise software business, was down 11%, or 7% at constant exchange rates.

SAP also said it was seeing “the first signs of a recovery in travel and expense management with the relaxation of global travel restrictions,” resulting in a stable quarter-over-quarter performance of the business. management of Concur’s expenses for the first time since the start of the pandemic.

“We are seeing strong adoption of our cloud portfolio as customers choose SAP for their business transformation,” said CEO Christian Klein. “Our strategy is working. This is the third quarter in a row of strong execution, and we continue to deliver unmatched customer value through the strength of our platform and applications. ”

The company also said that as many countries begin to reopen, SAP has seen a positive impact on demand around the world.

SAP has raised its forecast for the full year, with cloud revenue now between 9.3 billion and 9.5 billion euros, from a previous range of 9.2 to 9.5 billion euros euros.

The company has cloud and software revenue of between 23.6 billion and 24 billion euros, against a previous range of 23.4 to 23.8 billion euros. SAP now forecasts annual operating profit at constant currencies of € 7.95 billion to € 8.25 billion, from a previous range of € 7.8 billion to € 8.2 billion. euros.

Write to Eric J. Savitz at [email protected]


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