A bullish SAP SE raised its fourth-quarter outlook on third-quarter financial results that it said were “beyond expectations.”

The business software giant missed earnings forecasts on slightly higher-than-expected revenues. But the higher forecast appeared to satisfy investors, who bid the stock up about 2 percent in opening trading in trading Friday morning.

SAP reported third-quarter revenues of $5.85 billion, slightly ahead of consensus estimates of $5.8 billion. Earnings per share came in at 99 cents, which was below consensus estimates of $1.08 and which broke the company’s four-quarter-long streak of beating expectations. However, SAP attributed the profit shortfall to “an increase in stock-based compensation expense following the strong appreciation of SAP’s share price in the third quarter.”

The company raised its low-end forecast for full-year cloud subscriptions and support revenue from $3.2 billion to between $3.25 and $3.3 billion. That’s up by one third over last year. It also raised its low-end forecast of full-year operating profit to $7.1 billion, up from its previous estimate of $6.95 billion.

Executives said business is good across the board – even in Europe, where the Brexit vote has had investors fretting about a recession on the continent. The flagship business suite is doing particularly well. “The S/4HANA innovation cycle is the fastest in our history and is catalyzing the performance of all SAP cloud solutions,” CEO Bill McDermott (above) said in a prepared statement.

SAP said it added more than 400 S/4HANA customers in the quarter, 40 percent of them new. Its revenues in the Europe/Middle East/Africa region rose nearly 40 percent. More than 10 percent of the company’s enterprise resource planning (ERP) customers have signed onto the new release, the fastest adoption rate in history, McDermott said.

The cloud business was also strong, with cloud subscriptions and support revenue up 29 percent year-over-year to $836 million and new cloud bookings up 24 percent. The growth rate was down slightly from the second quarter’s 33 percent, but still strong in light of the larger base. Year-to-date cloud revenues are up 33 percent.

The company highlighted the fact that “predictable revenue” – or that which is driven by subscription, or maintenance fees – is now 64 percent of the total, up one percent from last year. One of the chief benefits of the software-as-a-service model is more predictable revenue streams.

It also stressed its successful diversification into markets outside of ERP. McDermott said SAP’s vertically focused business units are leading their markets by “very, very large margins.” For example, its Ariba Inc. procurement platform is the world’s largest with, 2.4 million companies transacting more than $840 billion in business annually. Its Concur expense management platform is used by more than 44 million end users.

Barclays Capital Inc. issued a bullish preliminary analysis before SAP’s earnings call. Noting that year-to-year comparisons were affected by a change in last year’s fourth quarter in the way SAP accounts for financial results at its Concur subsidiary, Barclays noted that “bookings were up by a sizable 44 percent organically, and this clearly shows that this business is accelerating and Q3 revenues and billings are understating this health.”

SAP’s results were announced just hours after Microsoft blew away estimates with first quarter earnings thatwere highlighted by 116 percent growth in cloud computing revenues.

On the earnings call, McDermott put the results in perspective. Operating profits were up only 1 percent, but that’s still strong in light of 15 percent growth the company reported in the same quarter a year ago, he said. In addition, he said, “We hired 2,500 people in Q3, which was our biggest hiring quarter this year. We made investment in co-innovation with strategic, replicable customers to drive sustainable growth. Our rising share price caused a nearly €300 million effect for employee stock-based compensation.”

McDermott highlighted, in particular, SAP’s close relationship with Microsoft and Microsoft’s recent adoption of SAP’s SuccessFactors Human Capital Management system. SuccessFactors also recently won Gartner Inc.’s highest rating for HCM systems for companies with more than 5,000 employees.

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