Customers’ strong adoption of SAP cloud-based solutions has kept the momentum of the software enterprise’s cloud business growth, pushing a 20{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} increase in cloud revenue.
SAP has released its third-quarter preliminary financial results that ended September 30, 2021, showing increase performances in current cloud backlog, SAP S/4HANA cloud backlog, cloud revenue, and operating profit. With Q3’s approximate results that were above market expectations and consistent growth in cloud business backed by its RISE with SAP offering, the company is raising its full-year revenue and profit outlook for 2021.
Christian Klein, SAP CEO, shared in LinkedIn that the published preliminary results demonstrated the enterprise giant’s effective cloud strategy. He said:
“Customers are choosing SAP for their business transformation in the cloud. A big thank you to the entire SAP team for driving record adoption of our applications and our platform, leading to a strong acceleration of our cloud growth.”
SAP Cloud-Based Solutions Accelerating Q3 Results
The software giant’s third-quarter financial results reflected that more and more customers worldwide continue to acknowledge SAP technologies and services’ differentiated capabilities critical in their transformation journey during these disruptive times. SAP’s unparalleled industry expertise and expanded partnerships across geographies have been helping customers redefine and optimise their core end-to-end business processes.
This year’s latest business transformation innovation, RISE with SAP, has steadily been gaining subscriptions from customers of all sizes, including large clients. Organisations that have embraced RISE with SAP in the third quarter include NBA, Energizer, and Inchcape plc, a global automotive distribution business working closely with automotive manufacturers in over 35 countries spanning Asia, Australia, Europe, Africa, and South America.
Cloud Performance
- 24{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} increase in current cloud backlog to €8.17 billion and 22{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} increase at constant currencies
- 60{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (Non-IFRS) increase in SAP S/4HANA to €1.28 billion and 58{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} increase at constant currencies
- 20{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} increase in cloud revenue to €2.39 billion and 20{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} increase at constant currencies
- 46{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} growth in SAP S/4HANA cloud revenue growth to €276 million and 46{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} increase at constant currencies
- 7{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} increase cloud and software revenue to €5.91 billion and 6{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} increase at constant currencies
Strong growth in current cloud backlog across its cloud portfolio, in particular with S/4HANA Cloud, sequentially grew SAP’s revenue. Moreover, with the progressing global adoption of RISE with SAP subscription-based offering, SAP’s software licenses decreased, as anticipated, to 8{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} year over year to €0.66 billion and down 8{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (at constant currencies).
Profit and Revenue Numbers
- 3{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} percentage points increase year over year to 77{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} on predictable revenue
- 15{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} decrease in IFRS operating profit to €1.25 billion
- 4.3 percentage points decrease in IFRS operating margin to 18.2{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} due to higher share-based compensation expenses (primarily related to Qualtrics)
- 2{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} increase in non-IFRS operating profit to €2.10 billion and 2{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} increase at constant currencies
- 0.9 percentage points decrease in non-IFRS operating margin to 30.7{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} and 0.7 percentage points decrease at constant currencies
- 10{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} decrease in earnings per share to €1.19 (IFRS) and a 2{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} increase to €1.74 (non-IFRS), including another strong contribution from Sapphire Ventures
A disposal gain of €77 million related to the launch of SAP Fioneer, a dedicated Financial Services Industry unit jointly owned by SAP and Dediq, was considered part of the operating profit.
“This has been an excellent quarter across all key financial metrics. We are seeing sustained, strong progress in SAP’s transformation. Our cloud business is growing at an accelerating pace and has led to our improved full-year outlook,” said Luka Mucic, SAP CFO.
All 2021 figures in SAP’s release are approximate due to the preliminary nature of the announcement.
