Revenues from SAP cloud-based solutions significantly contributed to the stellar 2021 first-quarter financial results of the German software company.
SAP’s cloud business, along with its latest concierge service offering RISE with SAP, continues to gain momentum as reflected in the company’s first-quarter preliminary financial results. The tech enterprise also achieved significant competitive wins in ERP, digital supply chain, and across its broader cloud solution portfolio.
Christian Klein, SAP of CEO, said that the company is witnessing strong growth across all applications and is anticipating a further increase in the coming months. He stressed:
“Our new offering ‘RISE with SAP’ is rapidly becoming a massive accelerator to our customers’ business transformations with our platform at the center. Together with our unique ecosystem of more than 22,000 partners and with a strong innovation pipeline for the year, we are well on track with our strategy to deliver robust cloud growth.”
SAP Cloud-Based Solutions by the Numbers
Based on the Q1 approximate figures ending 31st March 2021, the cloud portfolio revenues recorded an increase of 7{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} year over year to €2.14 billion (IFRS), up 7{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} to €2.15 billion (non-IFRS) and up 13{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS) at constant currencies. SAP had a commendable recovery on its current cloud backlog achieving a 15{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} increase to €7.63 billion and up 19{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} at constant currencies.
Cloud and software revenue increased by 1{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} to €5.43 billion (IFRS and non-IFRS) and 6{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS at constant currencies). SaaS/PaaS cloud revenue outside the Intelligent Spend business recorded an increase of 24{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} at constant currencies.
“The first quarter of 2021 was unique in many ways. We had the highest order entry growth across cloud and software in five years while posting the strongest increase in Non-IFRS operating profit and margin in a decade. In the mid-term SAP’s expedited shift to the cloud will accelerate topline growth and significantly increase the resiliency and predictability of our business,” said Luka Mucic, SAP CFO.
SAP’s strategic move of returning Qualtrics to the public market through an initial public offering (IPO) and closing a deal with Sinch for SAP Digital Interconnect’s (SDI) acquisition have impacted some of the company’s key performance indicators.
The Qualtrics IPO and the accelerated harmonisation of SAP’s cloud delivery infrastructure have created an impact on the operating profit and margin–a decrease of 21{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} to €0.96 billion IFRS operating profit and 3.4 percentage points to 15.1{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} decrease in operating margin.
As for the services revenue, there was a decline of 18{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} year over year to €0.9 billion (IFRS and non-IFRS) and a decrease of 14{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS at constant currencies) as a result of the November 2020 divestiture of SAP Digital Interconnect, which contributed approximately €90 million of services revenue (IFRS and non-IFRS) in the same period last year.
2021 Outlook
With the strong cloud business uptake from customers, SAP expects a reacceleration of cloud revenue growth to reach €9.2 – 9.5 billion non-IFRS at constant currencies (2020: €8.09 billion), up 14{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} to 18{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} at constant currencies. While Concur continues to take the hit from the pandemic, customers subscribing to RISE with SAP to support their holistic business transformation is anticipated to prompt a decrease in the software licenses’ revenue.
Moreover, SAP expects to reach approximately 75{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (2020: 72{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd}) share of more predictable revenue (defined as the total of cloud revenue and software support revenue), including an improvement in the gradual global demand environment of RISE with SAP in the second half of 2021.
The final first quarter 2021 quarterly statement will be published on 22nd of April 2021.
