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SAP shares up 4.4% in early trade after raised cloud business outlook

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SAP shares up 4.4% in early trade after raised cloud business outlook

FRANKFURT (Reuters) -Shares in SAP were up 4.4% in Lang & Schwarz pre-market trade on Tuesday after the German software company raised its full-year targets on strong cloud business in the third quarter.

Cloud revenue grew 27%, adjusted for currency effects, to 4.35 billion euros ($4.71 billion) in the third quarter, boosted by Cloud ERP Suite resource planning software sales which rose by 36%.

Artificial intelligence was a key growth driver, according to CEO Christian Klein. “Around 30% of our cloud contracts in the third quarter included AI use scenarios,” he said late on Monday.

With its guidance for 2025 unchanged, Barclays analysts said in a note that “even the new guide looks conservative”.

They added that management “encouragingly” spoke on this conservatism and said 2025 targets remain unchanged “for now”.

Operating profit grew by 28% to 2.24 billion euros, exceeding expectations, helped by cost-cutting measures and a comparatively low number of new hires, CFO Dominik Asam said.

The company expects the cost of an ongoing restructuring at around 3 billion euros as it evaluates up to 10,000 of its roughly 100,000 jobs to prepare for the emerging era of AI.

On this basis, the Walldorf-based group raised its full-year cloud and software revenue target to 29.5-29.8 billion euros from 29-29.5 billion euros.

It now sees its 2024 operating profit at 7.8 billion euros, up from a previous forecast of 7.6-7.9 billion euros.

($1 = 0.9243 euros)

(Reporting by Hakan Ersan, writing by Miranda Murray and Marleen Kaesebier; editing by Jason Neely)

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