SAP SE surprised financial analysts today after reporting revenue of 7.51 billion euros for the second quarter ended June 30.

Analysts polled for the Refinitiv consensus estimate had expected the company to post revenue of 7.32 billion euros. In constant currency, SAP’s second-quarter sales rose 5% year-over-year.

One of the main contributors to SAP’s stronger-than-expected revenue was the rapid growth of its cloud business. The business grew 24% in constant currency, to 3 billion euros. SAP’s cloud backlog, a measure of future revenue, increased 25% to surpass 10.4 billion euros.

SAP sells software that large enterprises rely on to power their business operations. Like other major players in the enterprise technology market, the company is shifting from selling on-premises software licenses to providing cloud services. SAP’s second-quarter results are the latest sign that its efforts in this area are paying dividends.

The growth of SAP’s cloud business during the quarter was driven partly by strong demand for S/4HANA Cloud, its managed enterprise resource planning platform. Companies use enterprise resource planning, or ERP, software to manage core business tasks such as product development, logistics and sales. 

SAP’s revenue from S/4HANA Cloud jumped 72% year-over-year, to 472 million euros. The revenue backlog associated with the platform, meanwhile, is now 2.25 billion euros after growing 87% from 12 months ago. SAP says more than 650 customers signed up for  S/4HANA Cloud during the second quarter.

“This quarter again proves that our strategy is resonating, even in an increasingly challenging external environment,” said SAP Chief Executive Officer Christian Klein. “We continued to deliver strong topline growth, exceeding revenue expectations and increasing cloud profitability.”

Whereas SAP’s revenue topped the consensus estimate, its earnings fell short of expectations. The company closed the second quarter with adjusted earnings per share of 28 cents, below the 44 cents that analysts had expected. SAP attributed the drop mainly to a lower earnings contribution from investment firm Sapphire Ventures, which operated as SAP’s corporate venture capital arm until spinning off in 2011.

SAP also lowered its adjusted profit outlook for the 2022 fiscal year. The company is now projecting adjusted profit of 7.6 billion euros to 7.9 billion euros, down from the previously forecasted range of 7.8 billion euros to 8.25 billion euros. SAP cited an “impact of approximately €350 million at constant currencies from the war in Ukraine and a potential continued marked decline of software licenses revenue.”

SAP expects profitability to improve next  year, with the company projecting double-digit growth in operating profit for 2023. “In light of its strong cloud momentum and most recent favorable currency exchange rates development, SAP expects to update its mid-term ambition in the upcoming quarters,” the company detailed.

SAP’s strategy for continuing its cloud momentum includes multiple components. One key component is RISE with SAP, a program launched last year that helps customers move from on-premises versions of the company’s software to its cloud services. Acquisitions represent another element of SAP’s growth strategy.

SAP announced its latest acquisition today in conjunction with its earnings report. The company has bought Askdata, an Italy-based startup incorporated as INNAAS srl. It provides a platform that enables workers to analyze business data stored in their organizations’ internal systems using natural language commands.

SAP didn’t disclose the terms of the acquisition. The company plans to integrate Askdata’s technology with SAP Analytics Cloud, its cloud-based business intelligence platform. 

Photo: SAP

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