SAP’s cloud business delivered again in the third quarter of 2016, with IFRS cloud subscriptions and support revenue growing 28 per cent year-over-year, and new cloud bookings up 24 per cent in the third quarter.
Cloud and software revenue delivered more modest growth of 8 per cent to €4.45 billion (IFRS).
While the company’s IFRS operating profit was down 9 per cent to €1.10 billion, SAP attributed this to an increase in stock-based compensation expenses, following strong appreciation in the company’s share price during the quarter (the stock price has risen from a low of €65.20 on 27 June to €81.09 at time of publication).
“In the third quarter we demonstrated continued momentum and strong execution. Year to date we are tracking to the upper end of all outlook metrics set at the beginning of the year. Paired with a robust pipeline, this gives us the confidence that we will deliver yet another strong fourth quarter,” said Luka Mucic, CFO, SAP.
SAP has now signed more than 4100 customers for S/4 HANA, adding 400 in the third quarter – 40 per cent of which were new SAP customers.
“Strong customer adoption of the SAP portfolio is driving results beyond expectations. The S/4HANA innovation cycle is the fastest in our history and is catalysing the performance of all SAP cloud solutions. We are a growth company and confidently raise our guidance for the full year,” said SAP CEO Bill McDermott.
Other product portfolios which performed strongly were customer engagement and commerce (CEC), which delivered double-digit year-over-year customer growth in Q3, while cloud subscriptions and support revenue in the SAP Business Network division (covering Ariba, Concur and Fieldglass) was up 17 per cent.
On a regional basis, cloud and software revenue grew by 6 per cent (IFRS) in the EMEA region, and by 9 per cent in the Americas. Cloud subscriptions and support revenue grew by 34 per cent (IFRS) and 24 per cent (IFRS) respectively in EMEA and the Americas, with Germany, France, UK, South Africa, Brazil and Mexico delivering the most growth.
In APJ, cloud and software region was up by 13 per cent, with cloud subscriptions and support revenue growing by 50 per cent (IFRS). SAP had double-digit software license revenue growth in Japan, Malaysia and Singapore and “solid” growth in the Greater China region, which includes China, Hong Kong and Taiwan.
In response to these positive results, SAP has raised its guidance for full year non-IFRS cloud subscriptions and support revenue to be in the range of €3.00 billion – €3.05 billion at constant currencies (2015: €2.30 billion), representing growth of 33 per cent. 2016 non-IFRS cloud and software revenue is expected to increase by 6.5-8.5 per cent, while full year non-IFRS operating profit is expected to be in the range of €6.5 billion – €6.7 billion.