SAP SE’s profits rose sharply in its first fiscal quarter, helped by strong growth in its cloud business, but revenues came in flat, in line with earlier guidance.

Even so, the German software giant said it’s bullish on full-year results as customer migrations to the cloud accelerate.

Total revenue rose 2% in constant-currency terms, to $7.56 billion. Cloud revenue rose 13%, to $2.57 billion. Combined cloud and software revenue edged up 6%, to $6.52 billion, and operating profit jumped 24%, to $2.1 billion. Net profit rose to $1.99 billion from $1.22 billion in the same quarter a year ago.

Cloud growth was strong across SAP’s line of businesses, including the Qualtrics experience management business it took public in January, human resources, procurement and core enterprise resource planning platform. Software license revenues grew 11%, although executives said they expect those figures to be “pressured” going forward as customers migrate to cloud subscriptions.

“This quarter was one of the strongest quarters in the history of SAP,” said Chief Executive Christian Klein (pictured). “We saw the fastest growth in new cloud business in five years.”

SAP reiterated the full-year guidance it had raised earlier this month, saying operating profit should come in at between $9.3 billion and $9.8 billion on cloud and software revenues of between $28.1 billion and $28.6 billion.

“Cloud revenue growth will accelerate from here and will drive resilience and predictability,” Klein said. The company’s cloud backlog grew 19% to $9.2 billion and the share of predictable revenue grew by 2% to 70% in the first quarter.

SAP said it added 4,800 new customers in the quarter and that the number of customers using its next-generation S/4HANA enterprise resource planning platform grew 16% to 16,400.

Executives said they were particularly pleased with the performance of its RISE with SAP digital transformation program announced in January. The program is meant to help companies accelerate their move to the cloud through a consolidated contract that moves customers to a subscription pricing model.

“RISE with SAP will help our other lines of business big time,” Klein said. “We have much better cross-sell opportunities, the migration is much smoother and customers can migrate in a modular way.”

Nucleus Research Inc. Analyst Trevor White agreed, saying the RISE program effectively meets customers’ needs to migrate to more modern platforms while preventing incursions by rivals.

“RISE shows that they’ve accepted where they need to go and they’ve put a lot of resources into getting there,” he said. “We’re really bullish on it. There’s always the risk of defection in cloud migration and RISE is a good program to address that.”

Results were strong across regions, with cloud revenues up 24% in Europe/Middle East/Africa, 7% in the Americas and 18% in the Asia-Pacific region.

Pandemic-fueled cloud migration is happening across the globe, said Scott Russell, SAP’s head of customer success. “A lot of the initiatives in Q1 were around hiring and retaining the best talent or operationalizing their digital businesses in the cloud,” he said. “We expect that to continue.”

SAP’s own hiring momentum in the quarter slowed, with only 300 people added, but Klein said the company still expects to hire around 3,000 people over the course of the year.

Photo: SAP