SAP Stock Dips as Revenue Misses Despite Profit Beat, Cloud Growth Slows
Despite a strong earnings report, SAP (SAP) stock experienced a decline in after-hours trading Wednesday as revenue fell short of analyst expectations adn a key cloud metric signaled slowing growth. The software giant’s performance underscores ongoing concerns about macroeconomic headwinds impacting deal closures, particularly within its manufacturing customer base.
SAP reported its third-quarter earnings after the market closed on Wednesday,October 25,revealing adjusted earnings per share of 1.59 euros – a 37% increase year-over-year. Total revenue for the quarter ended September 30 reached 9.076 billion euros (approximately $10.54 billion), representing a 7% increase.However, this figure missed the anticipated 9.11 billion euros projected by analysts.
Cloud Computing Performance Under Scrutiny
While overall earnings were positive, the company’s cloud performance drew attention.Cloud computing subscriptions and support revenue increased by 27% to 5.29 billion euros (roughly $6.14 billion), slightly below the estimated 5.328 billion euros. A more critically important concern emerged with SAP’s Current Cloud Backlog (CCB) – a metric tracking future revenue from customer contracts. CCB rose 23% to 18.8 billion euros (about $21.8 billion) in the third quarter, falling short of the expected 27% growth rate. “The slower CCB growth suggests potential headwinds in securing new cloud contracts,” one analyst noted.
SAP is actively transitioning from customary software license sales to a subscription-based cloud services model, mirroring the strategy of competitors like Oracle (ORCL). This shift is crucial for long-term growth, but the latest figures indicate the transition might potentially be facing challenges.
Legal Battles and Stock Performance
The company also faces ongoing legal challenges. The U.S. Supreme Court recently declined to hear SAP’s appeal in a lawsuit brought by U.S. firm Teradata, which alleges violations of antitrust law.
On the stock market today, NYSE-listed SAP stock fell more than 2% to 269.49 in extended trading. Despite Wednesday’s dip, SAP stock had advanced 14% in the U.S. as of the close of the regular session.
According to IBD Stock Checkup, SAP stock currently holds a Composite Rating of 88 out of a possible 99, indicating strong essential and technical characteristics.
For ongoing updates on artificial intelligence, cybersecurity, and cloud computing, follow Reinhardt Krause on X (formerly Twitter) @reinhardtk_tech.
