The stock for German enterprise software giant SAP experienced a 3% dip following the release of its second-quarter financial results, which presented a mixed picture for investors.
SAP’s earnings per share beat estimates, but revenue narrowly missed expectations, impacting its stock price.
- SAP’s second-quarter earnings per share (EPS) of €1.50 ($1.76) surpassed Wall Street’s €1.43 estimate.
- Revenue for the April-June period reached €9.03 billion, falling slightly short of the €9.09 billion expected by analysts.
- The company’s cloud business continues to be a strong growth engine, with revenue up 24% year-over-year.
- SAP’s stock has seen a 25% increase year-to-date.
- Six Wall Street analysts currently hold a consensus “Strong Buy” rating on SAP stock.
SAP announced earnings per share of €1.50 (US$1.76), exceeding the Wall Street estimate of €1.43 per share. However, revenue for the April through June period, totaling €9.03 billion, just missed analyst expectations of €9.09 billion. Despite this, sales saw a 9% increase compared to the previous year.
Cloud Growth Fuels Performance
The company’s cloud business remains its primary growth driver. Revenue in this segment surged by 24% year-over-year, reaching €5.13 billion. Free cash flow also demonstrated robust performance, climbing 83% year-over-year to €2.35 billion.
SAP’s strategic pivot towards becoming a leading cloud provider is gaining significant momentum. The company’s current cloud backlog has expanded to €18.05 billion, marking a 22% increase from the prior year. Cloud gross profit improved to €3.85 billion, with a gross margin of 75.2%, an uptick from 73.3% a year ago.
Geographically, SAP reported strong growth across its operations. Cloud revenue in the Asia-Pacific region climbed 33% year-over-year in the second quarter. The Americas also showed solid performance, with annualized growth of 16%. SAP’s investment in artificial intelligence (AI) innovation is a key factor in its business transformation, with AI agents delivering notable efficiency improvements.
Analyst Outlook Remains Positive
Currently, SAP stock is up 25% for the year. Looking ahead, six Wall Street analysts have issued ratings for SAP stock over the past three months, resulting in a consensus “Strong Buy” rating. This includes five “Buy” ratings and one “Hold.” The average price target for SAP stock is $327.60, suggesting a potential upside of 6.62% from current trading levels. Analysts may adjust these ratings following the release of the company’s latest financial results.
Analysts’ ratings for SAP stock can be found here.
