SAP shares experienced a significant increase in Thursday morning trading following the release of the company’s impressive third-quarter financial results. The German business-software giant reported higher revenue and operating profit, largely driven by growth in its core cloud business.
Strong Performance and Higher Revenue
As of 0720 GMT, SAP shares were trading 6.4% higher at EUR128.84. On a non-IFRS basis, the company revealed that their total revenue for the quarter had climbed to a substantial 7.74 billion euros ($8.16 billion), compared to EUR7.48 billion during the same period last year. Notably, cloud revenue also saw a significant boost, rising to EUR3.47 billion from EUR2.99 billion previously. However, software-licenses revenue experienced a slight decline, falling to EUR335 million from EUR406 million.
Shift Towards Cloud Services
SAP’s decision to prioritize subscription-based cloud services over traditional software-license sales is proving fruitful, as the company strives for a more profitable and predictable business model based on recurring revenue. In fact, SAP’s share of more predictable revenue surged to 82% in the quarter, marking a 2% increase compared to the previous year.
CEO Optimistic about Growth
Christian Klein, SAP’s Chief Executive, expressed his satisfaction with the company’s performance, stating, “We accelerated cloud growth across our portfolio and significantly expanded our cloud gross margins.”
Strong Global Performance
According to SAP’s report, Brazil, India, and the Netherlands were standout performers in terms of cloud revenue growth during the quarter. Additionally, Canada, China, France, Germany, Japan, and Switzerland also delivered notable results.
Overall, these impressive Q3 results and the company’s commitment to cloud innovation have fueled investor confidence and led to a surge in SAP shares.
SAP Reports Increase in Operating Profit
SAP, the European software company, has announced a significant increase in its operating profit. The operating profit rose to EUR2.28 billion, up from EUR2.08 billion, resulting in an operating margin of 29.4% compared to 27.8% previously.
Analysts had predicted total revenue of EUR7.73 billion and cloud revenue of EUR3.53 billion. Additionally, they had forecasted an operating profit of EUR2.19 billion and a 28.4% operating margin. These figures were based on a company-provided consensus using non-IFRS (International Financial Reporting Standards) methods.
SAP, along with other European software companies, presents its financial figures in two sets. One set follows the international accounting method known as IFRS, which aims to establish a global reporting standard. However, analysts and investors typically focus on SAP’s non-IFRS numbers. These figures exclude share-based compensation, restructuring expenses, and acquisition-related charges.
Looking ahead, SAP maintains its expectations for the year. It forecasts a non-IFRS operating profit between EUR8.65 billion and EUR8.95 billion at constant currencies. Additionally, it expects cloud revenue between EUR14 billion and EUR14.2 billion at constant currencies.