SAP SE posted second-quarter revenue and operating profit that beat analyst expectations and raised 2025 operating profit projections, sending the enterprise software maker’s stock up more than 4% after hours.

Revenue rose to $9.02 billion from $8.22 billion in last year’s second quarter and beat analysts’ consensus forecast of $8.98 billion. Cloud and software revenue was $7.82 billion, up from $7.09 billion a year earlier. Software license revenue fell 27% as customers shifted to cloud subscriptions.

Operating profit rose to $2.11 billion from $1.59 billion. Analysts had expected $1.97 billion.

SAP said its current cloud backlog rose 28%, to $16.12 billion, and cloud revenue grew 25% on the strength of 33% growth in the company’s cloud-based enterprise resource planning suite. The share of more predictable revenue, an important indication of business stability, grew two percentage points, to 84%. Cloud gross profit rose 29%. Earnings per share jumped 59%, to $1.20.

“We continue to deliver despite the volatile environment in the software industry,” said Chief Executive Christian Klein (pictured), whose contract was extended through April 2028 earlier this year. “More and more customers are moving to the cloud, and our portfolio is becoming more attractive thanks to our artificial intelligence capabilities.”

That’s principally Joule, the generative AI assistant SAP introduced last fall that allows customers to query data from both SAP and third-party systems in natural language. “In every deal we closed, our AI played a role,” Klein said. “Joule is becoming our new user experience.”

Land and expand

The company said its “RISE with SAP” digital transformation initiative continues to drive strong growth, with 18 new named enterprise accounts signed during the quarter. An additional half-dozen large companies each went live on SAP S/4HANA Cloud and “GROW with SAP,” an offering aimed at helping customers reliably and speedily adopt cloud ERP. Klein said 60% of the customers it signed in the quarter were new to SAP.

“RISE brings best-of-suite ERP to our installed base. GROW is the perfect choice for greenfield projects and net new customers,” he said. “Once we have landed with RISE and GROW, we go into expand mode.”

Klein said the company is “confidently raising the operating profit and ambition through 2025.” It now expects 2025 operating profits of $11.1 billion compared to a previous forecast of $10.9 billion.

One reason is the strong progress SAP said it’s making on an ongoing transformation program that aims to drive efficiency improvements through the internal use of AI. In January, it announced a company-wide restructuring program that will eliminate up to 10,000 jobs, mostly through voluntary attrition and retraining.

Klein said the company continues to hire “only for the skill sets we need” and will end 2024 with about as many employees as at the end of last year. It took additional a restructuring charge of $650 million in the quarter and estimated the total cost of the program will exceed $3 billion by the end of this year.

However, Klein said the short-term restructuring charges will be more than made up by long-term savings. “We are focusing on simplifying our go-to-market and expanding our channel program,” he said. “Expected savings are in the triple-digit range.”

Photo: SAP