SAP’s cloud revenue jumps 20% as European software giant ramps up rivalry with Salesforce

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The logo of German software group SAP is pictured at its headquarters in Walldorf, Germany, May 12, 2016.

Ralph Orlowski | Reuters

German software giant SAP on Thursday posted a jump in revenue at its fast-growing cloud unit, which helped boost the company’s earnings performance in the third quarter.

SAP’s third-quarter cloud revenue totalled roughly 2.4 billion euros ($2.8 billion), up 20% from the same period a year ago, while its backlog of cloud contracts amounted to almost 1.3 billion euros, up 58%.

Overall adjusted revenue came in at 6.8 billion euros, up 5% year-over-year, bolstered by growth in cloud, while adjusted earnings per share climbed 2% to 1.74 euros thanks to profitable start-up bets at spinoff firm Sapphire Ventures.

Last year, SAP outlined plans for a broad shift from on-premise IT infrastructure to remote cloud computing facilities. SAP’s renewed focus on cloud marked a challenge to enterprise software rivals like Salesforce and Oracle.

SAP shares climbed 0.7% as European markets kicked off Thursday’s trading session.

“We pivoted this company to the cloud,” SAP CEO Christian Klein told CNBC’s “Squawk Box Europe” Thursday.

“We are changing our business model by our own … shifting from upfront licenses on-premise to a subscription-based business model in the cloud.”

SAP last week raised its full-year outlook for the third time this year on the back of momentum in its cloud business. The firm confirmed those targets on Thursday, saying it expected cloud revenue to climb between 16% and 19% in 2021.

Klein said the company was “very confident” in its ability to navigate coronavirus uncertainty and disruption in global supply chains.

“Technology helps to overcome these challenges,” he said. “When you talk about the future of work, you need to drive collaboration; technology is needed. When you talk about resilient supply chain, look at all the container ships that are in front of the harbors that cannot come in; that is where technology — where our business network — can help.”

SAP’s stock price plunged sharply in October last year after it cut sales guidance due to concerns around the impact of Covid-19 on business spending. It has since staged a recovery, having climbed more than 11% so far this year.



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