The recent SAP Q3 2024 results indicate a robust financial performance, with notable growth in cloud revenue and continued expansion in cloud backlog across the company’s global markets.
In the third quarter of 2024, SAP’s cloud-focused strategy has driven impressive financial gains, particularly within its Cloud ERP Suite. The company reported a current cloud backlog of €15.4 billion, reflecting a 25% year-over-year growth, which reached 29% when adjusted for constant currencies. Cloud revenue rose by 25%, with the Cloud ERP Suite segment achieving a 34% increase, underscoring SAP’s focus on expanding cloud-based enterprise resource planning (ERP) solutions. Total revenue grew by 9%, with cloud and software segments collectively achieving an 11% increase, demonstrating SAP’s intention to capitalize on the demand for scalable cloud services.
Christian Klein, SAP’s Chief Executive Officer, highlighted the company’s successful quarter, emphasizing the continued enhancement of SAP’s Business AI initiatives and the adoption of advanced technologies like SAP Knowledge Graph, which aim to strengthen the firm’s digital ecosystem. According to Klein, these innovations are increasingly embedded in new client cloud deals, aligning with SAP’s goal to be at the forefront of AI-driven business applications.
SAP Q3 2024 Results: Detailed Financial Overview
SAP’s quarterly figures also indicate efficiency improvements resulting from the ongoing 2024 transformation program. The program has contributed to a 29% increase in IFRS operating profit, with non-IFRS operating profit up by 27% on a year-over-year basis. Dominik Asam, Chief Financial Officer at SAP, expressed satisfaction with the operational progress, noting that the transformation efforts have helped maintain a strong profit margin and free cash flow, which rose by 44% to €1.25 billion for the quarter. These gains, Asam explained, are essential for meeting SAP’s 2025 objectives, despite a volatile economic environment.
In line with SAP’s strategic adjustments, software licenses saw a decline, decreasing by 15% as demand shifted towards subscription-based cloud solutions. Conversely, SAP’s predictable revenue base increased, now representing 84% of the company’s total, a rise of two percentage points from the previous year.
SAP’s IFRS cloud gross profit grew by 26%, and its non-IFRS gross profit climbed by 27%, reflecting continued revenue expansion and improved operational efficiency. Basic earnings per share increased by 15% to €1.25, while the effective tax rate rose to 33%, influenced by tax losses incurred from restructuring activities. The ongoing transformation program, aimed at creating a scalable and efficient operational framework, is expected to conclude in early 2025, potentially affecting 9,000 to 10,000 roles through voluntary leave and reskilling efforts.
Strategic Customer and Cloud Expansion in Q3
Throughout Q3, SAP strengthened its client portfolio with several new adoptions of RISE with SAP and GROW with SAP solutions. These offerings assist companies in leveraging SAP’s cloud-based ERP solutions to modernize business operations and support digital transformations. Notable clients include Clorox, Siemens Healthineers, and Panasonic Energy, among others. Additionally, high-profile clients such as NVIDIA and eBay implemented SAP S/4HANA Cloud to enhance their operational efficiency, demonstrating the appeal of SAP’s comprehensive cloud-based suite.
SAP’s regional cloud performance was particularly strong in the Asia Pacific and Japan (APJ) and Europe, the Middle East, and Africa (EMEA), with Brazil, Germany, Japan, and Spain experiencing notable growth. This geographic expansion reflects SAP’s intention to bolster its market presence in regions with rising demand for cloud solutions. Furthermore, SAP’s acquisition of WalkMe, a digital adoption platform, in September is expected to enhance the company’s service capabilities in enterprise user experience management.
SAP has raised its 2024 financial outlook, intending to further grow cloud and software revenue and operating profit. The company now anticipates cloud and software revenue in the range of €29.5 to €29.8 billion, an increase from previous estimates, reflecting a projected 10% to 11% growth at constant currencies. Non-IFRS operating profit is also expected to rise, targeting €7.8 to €8.0 billion, up from €7.6 to €7.9 billion, alongside an updated free cash flow forecast of €3.5 to €4.0 billion.
As SAP progresses with its transformation, it remains focused on its long-term goals, including the achievement of Net Zero carbon emissions by 2030 and increasing female representation in executive roles by 2027. With investments in AI technology and cloud infrastructure, SAP aims to maintain growth across its product lines, targeting scalability and alignment with evolving client needs.
The impact of currency fluctuations remains a potential variable, with the company projecting minor currency-related declines in reported revenue figures. Nonetheless, SAP remains optimistic about the resilience of its business model in adapting to economic shifts and supporting strategic growth across key technology and service areas.
