SAP results for the first quarter of 2023 demonstrate the company’s momentum and growth across various areas, including cloud services, data management, sustainability, and strategic partnerships.
Christian Klein, the Chief Executive Officer of SAP, announced that the company has entered a powerful new phase in its strategic transformation, as the fourth quarter results of 2022 demonstrated a clear tipping point. This was evident from the strong revenue and double-digit non-IFRS operating profit growth in the first quarter of the year. Furthermore, the company’s cloud momentum continues at a fast pace, which is contributing to its success.
Meanwhile, SAP Chief Financial Officer Dominik Asam echoed these sentiments and stated that the year has started on a good note. He expressed excitement at having joined an organization that is delivering and staying on the right track. The SAP results for the first quarter have shown accelerated topline growth and double-digit non-IFRS operating profit growth, which sets a solid groundwork for SAP’s full-year outlook. Asam emphasized the importance of following through on the company’s commitments and doing what they say, as it will continue to be of great importance to SAP. With these positive results, the company is now pivoting back to profitable growth in 2023.
Announcing SAP Results for Q1 2023
SAP’s current cloud backlog grew by 25% to €11.15 billion in the first quarter of 2023, with a 78% increase in the cloud backlog of SAP S/4HANA. Cloud revenue also saw a 24% increase to €3.18 billion, while software licenses revenue decreased by 13% to €276 million. Cloud and software revenue, however, increased by 10% to €6.36 billion, and services revenue increased by 12% to €1.08 billion. The share of predictable revenue increased to 82%. Cloud gross profit rose by 28% (IFRS) to €2.24 billion.
However, the IFRS operating profit decreased by 45% to €803 million due to the increase in share-based compensation and expenses from restructuring and regulatory compliance matters. Non-IFRS operating profit, on the other hand, increased by 12% to €1.87 billion. IFRS basic earnings per share decreased by 60% to €0.35, while non-IFRS earnings per share increased by 8% to €1.08. The effective tax rate was 40.5% (IFRS) and 28.3% (non-IFRS). Free cash flow decreased by 9%, mainly due to the impact of the sale of trade receivables in the previous quarter.
Additionally, SAP’s business operations wind down in Russia and Belarus is almost complete, and the potential escalation of the war in Ukraine could lead to adverse consequences for the company.
Recent Business Developments and Customer Wins
In the first quarter of 2023, SAP reported strong cloud revenue growth across all regions and notable customer wins across its solution portfolio. “RISE with SAP” continued to be the top choice for customers seeking end-to-end business transformations, including BMW Group, Henkel, and Thales Defense & Security Inc. Additionally, several companies such as Advanced Micro Devices, Air India, and Shinsegae International went live on SAP S/4HANA Cloud. Brazil, Germany, and India saw outstanding cloud revenue growth, while China, Japan, Mexico, the Netherlands, Switzerland, and the United States performed particularly strong.
Aside from the abovementioned customer wins, SAP also announced several significant business developments in the first quarter of 2023. These include an increase in the proposed dividend for the fiscal year 2022 by 5%, which is subject to shareholder approval at the upcoming AGM on May 11, 2023.
On February 1, 2023, SAP and Red Hat, Inc. expanded their partnership to increase SAP’s use and support for Red Hat Enterprise Linux. Additionally, on February 8, SAP announced a strategic partnership with Merck KGaA, Germany, to drive sustainable business practices innovation and accelerate the migration of Merck KGaA’s systems to the cloud with RISE with SAP, which includes SAP S/4HANA Cloud.
The same month also saw the enterprise software giant nominating Dr. h. c. Punit Renjen as a new member of the Supervisory Board, proposing him as the designated successor to Chairman, Prof. Dr. Hasso Plattner.
SAP’s March 2023 announcements
In March 2023, SAP, the German multinational software corporation, made several important announcements, including new products and strategic partnerships, and executive changes.
- SAP unveiled SAP Datasphere, the next generation of its data management portfolio, and announced new strategic partnerships with data and AI companies, including Collibra, Confluent, Databricks, and DataRobot. These partnerships aim to enhance SAP’s data management capabilities and enable customers to gain more insights from their data.
- The company also agreed to sell its entire stake of 423 million shares in Qualtrics International, which was acquired by funds affiliated with Silver Lake and Canada Pension Plan Investment Board for a total of approximately $7.7 billion. The transaction is subject to customary regulatory approvals and closing conditions.
- In addition, SAP closed a new sustainability-linked revolving credit facility of €3 billion for five years plus two one-year extension options. This move reflects SAP’s commitment to sustainability and responsible corporate practices.
- Furthermore, SAP launched GROW with SAP, a comprehensive offering built on SAP S/4HANA Cloud and SAP Business Technology Platform, designed to help midsize customers adopt cloud ERP and achieve speed, predictability, and continuous innovation.
- Lastly, the SAP Supervisory Board extended the contracts of two Executive Board members, Julia White and Scott Russell, for three years until 2027, while Sabine Bendiek, Chief People & Operating Officer and Labor Relations Director, announced that she will not seek to renew her Executive Board contract which ends on December 31, 2023.
