SAP SE’s restructuring plan that will eliminate or reassign about 8,000 jobs is intended to accelerate the company’s development of artificial intelligence features in its products and to “transform its operational setup to capture organizational synergies, AI-driven efficiencies and to prepare the company for highly scalable future revenue growth,” SAP said in a statement.

The announcement came as the enterprise resource planning giant reported revenue that beat analyst estimates and earnings per share that slightly underperformed expectations. Revenue for the quarter ended Dec. 31 rose 5%, to €8.47 billion ($9.25 billion), up from €8.06 billion ($8.79 billion) a year earlier and ahead of consensus estimates of €8.38 billion ($9.15 billion).

SAP’s cloud backlog increased by 27% in constant currencies to €13.7 billion ($14.97 billion), an all-time high. Sales of the next-generation S/4 HANA ERP suite jumped 61% in constant currencies. The share of revenue classified as “more predictable,” a measure of business stability, increased 2%, to 77%.

The strong sales growth and restructuring plans were a hit with investors, who bid up SAP shares nearly 7% in early trading.

2025 profit forecast increased

Chief Executive Christian Klein (pictured) said he hoped that up to two-thirds of the people affected by the restructuring will accept early retirement or move to other jobs within the company. “We’re giving SAP a future with high growth to give our 100,000 people the best future we can,” he said. “We’re going to invest over over €100 million in education to help people find jobs in the growth areas. ”

SAP said it expects full-year 2024 cloud and software revenue to fall in a range between €29.0 billion euros to €29.5 billion ($31.68 billion to $32.23 billion) and adjusted operating profit to range from €7.6 billion to €7.9 billion at constant currencies ($8.3 billion to $8.63 billion).

The restructuring is expected to cost about $2.2 billion while yielding only minor cost benefits, the company said. The payoff is expected to become evident in 2025. SAP increased its profit and free cash flow guidance for next year by €500 million, citing efficiencies gained from the transformation program.

SAP has been advancing its AI initiatives on multiple fronts. In September, it introduced a generative AI copilot called Joule that it expects to embed across its cloud software portfolio. Last July it was among a group of investors participating in a $500 million series B funding round by Aleph Alpha GmbH, a German startup focused on developing large language models. That same month, it invested unspecified amounts in LLM developers Anthropic PBC and Cohere Inc.

As part of its refocusing initiative, SAP mandated earlier this month that employees return to the office three days a week. Asked to explain the policy change during a press conference, Klein cited the importance of culture.

“I built my career at SAP by sitting with great architects to better understand how to build our product. Would that have been possible in the home office? No,” he said. Promising the days of having to “ask permission to take the kids to the doctor” are over, he said the goal is to seek a balance for every employee, but that face time is critical. “We cannot allow only work from the home office because we’re losing our culture and we have to be a team,” he said.

Photo: SAP