SAP cloud offerings, especially SAP S/4HANA Cloud, significantly contributed to the company’s first-quarter financial results that ended March 31, 2022.
German software multinational has released its Q1 2022 financials highlighting the steady acceleration of its cloud business, including the current cloud backlog.
In 2020, SAP has introduced the metric named “Current Cloud Backlog”, which replaces previously disclosed “New Cloud Bookings”, in a bid to improve the tech giant’s reporting on cloud business. The metric represents expected cloud revenue over the upcoming 12 months based on the existing cloud subscription contracts.
Luka Mucic, SAP Chief Financial Officer and Executive Board Member who had earlier announced his planned departure from the company on March 31, 2023, expressed that the first quarter is showing an optimistic start to 2022 and a strong business outlook. He emphasised:
“Despite the current macroeconomic environment, cloud revenue growth accelerated further, fueling total revenue growth. Current cloud backlog grew at a healthy rate and continues to support our confidence in our long-term plans and outlook for the year.”
SAP Cloud Offerings Bolstering Q1 2022 Performance
Following RISE with SAP’s stellar performance in 2021 as a springboard for the first months of 2022, SAP has reported a continued cloud momentum with cloud revenue, including current cloud backlog and SAP S/4HANA cloud revenue achieving double digit growth. The multinational company witnessed an outstanding quarter one cloud revenue performance across all regions, specifically the United States and Germany. Japan, China, Brazil, Canada, Switzerland, France, and the UK also reflected strong SAP cloud business.
“Customers powered another quarter of strong cloud growth as they turned to us for solutions to make their businesses more sustainable, their supply chains more resilient, and their enterprises more future-proof. Our signature ERP offering SAP S/4HANA grew at record levels demonstrating the confidence customers place in us to support their business transformations, “ stated SAP CEO Christian Klein.
Here are some of the financial highlights in Q1:
- 31% increase in cloud revenue and 25% increase at constant currencies driven by double-digit growth across the solution portfolio
- 28% increase in current cloud backlog and 23% increase at constant currencies, approaching €10bn
- 78% increase in SAP S/4HANA cloud revenue and 71% increase at constant currencies
- 86% increase in SAP S/4HANA current cloud backlog and 79% increase at constant currencies
- 10% increase in IFRS operating profit to €1.05 billion due to lower restructuring expenses
- 0.8 percentage points reduction in current cloud backlog growth at constant currencies and 4% decrease to €1.68 billion and 7% decrease at constant currencies in Non-IRS operating profit were attributed to the war in Ukraine
- 500 net new customers for SAP S/4HANA, reaching over 19,300 customers in total adoption– an 18% year over year increase
- Massive adoption of RISE with SAP by global companies such as Accenture, Canon Production Printing, Citizen Watch Company, Daimler Truck AG, Grupo Estrella Blanca, NEC Corporation, Qinqin Food, TELUS, Tramontina, and Wipro Limited, among many
- SAP’s solution portfolio major customer wins include Air France-KLM, FEMSA, Heineken, L’Oréal, Merck KGaA, Nippon Telephone and Telegraph Corporation, and Vodafone New Zealand, among others
SAP’s two major – Applications, Technology & Services (AT&S) and Qualtrics– also achieved strong double-digit growth, year over year. Driven by remarkable cloud revenue growth in SAP S/4HANA and Business Technology Platform, the AT&S segment grew by 10% to €6.70 billion year over year. Qualtrics segment revenue achieved a massive 58% growth to €320 million year over year, up 48% at constant currencies driven by renewal rates and major customer adoption of Qualtrics Experience Management Solutions by Australian Taxation Office, EY, Google Cloud, Hyundai Motor Asia Pacific, Kroger, Microsoft, National Australia Bank, and Royal Mail Group, among many.
2022 Business Outlook
SAP banks on its cloud-led strategy in conducting new business and customer cloud adoption to further propel the momentum of the adoption of SAP cloud offerings, which is forecasted to reach the firm’s mid-term ambition. The company reaffirms its 2022 outlook for revenue, non-IFRS operating profit, and free cash flow as follows:
- €11.55 – 11.85 billion cloud revenue at constant currencies (2021: €9.42 billion)
- €25.0 – 25.5 billion cloud and software revenue at constant currencies (2021: €24.08 billion)
- €7.8 – 8.25 billion non-IFRS operating profit at constant currencies (2021: €8.23 billion)
- Free cash flow above €4.5 billion (2021: €5.01 billion)
The war in Ukraine has impacted SAP’s business in Q1, with the company shutting down its cloud operations and planning to halt the support and maintenance of its on-premise products in Russia. As the unfortunate situation continues to unfold, the company forecasts a total negative revenue impact of approximately €300 million for the fiscal year due to a lack of new business as well as the cessation of existing business.
