SAP SE today reported higher third-quarter revenue and operating profit, bolstered by continued momentum in its cloud business and improving profit margins.

The enterprise resource planning giant also guided full-year operating profit toward the top of its earlier forecast. Although cloud revenue came in slightly below estimates, the company reaffirmed that cloud is the foundation for long-term growth.

Total revenue for the quarter ended Sept. 30 rose 11% year-over-year in constant currencies, to $10.53 billion, in line with analyst estimates. Operating profit climbed 15% at constant currencies, to $2.98 billion. Net income grew 29%, to $2.15 billion. Adjusted earnings per share rose 29%, to $1.84, ahead of Wall Street consensus estimates of $1.73.

SAP’s core cloud business continues to thrive, up 27%, to $6.13 billion, although slightly below analyst projections of $6.17 billion. Cloud revenue has grown more than 25% for five quarters in a row and now accounts for 58% of total sales, up from 51% a year earlier.

Investors largely brushed off the narrow miss in the cloud. SAP’s U.S.-listed shares fell about a half-point in after-hours trading.

Demand strong

The company’s Cloud ERP Suite, which underpins its enterprise software strategy, grew 31%, to $5.33 billion. Current cloud backlog, which is considered an indicator of future subscription revenue, rose 27%, to $21.85 billion. The figure reflects sustained customer demand even after incorporating last year’s acquisition of application usability specialist WalkMe Ltd. into the comparison.

“Growth in SAP’s current cloud backlog, which represents future revenue from cloud subscription contracts, is a key indicator of the company’s long-term predictable revenue stream,” said Forrester Research Inc. Senior Analyst Akshara Naik Lopez, in remarks before earnings were announced.

The share of predictable revenue increased by two percentage points to 87%, underscoring SAP’s continued shift to recurring, subscription-based income. Traditional software license sales fell 43%, to $186 million, as the company rapidly divests itself of its legacy on-premises business.

SAP said operating profit was hurt by roughly $116 million from a change in tax-related case law and an equal amount tied to a workforce transformation program. The company expects to incur an additional $116 million in related expenses during the fourth quarter.

Even with these onetime factors, operating profit rose by double digits, and both margins and cloud profitability improved year-over-year.

“Overall, we are gaining market share as our customers are adopting solutions across the entire business suite,” said Chief Executive Christian Klein (pictured). He cited a recent International Data Corp. study that showed SAP growing 10 percentage points faster than the rest of the market in 2024.

SAP highlighted said recent artificial intelligence enhancements to its entire line of applications are paying off for customers.

“We are proud of releasing more and more AI agents, but it is not the number that counts,” Klein said. “It is about how we automate and infuse intelligence across end-to-end business processes.”

Growth reaffirmed

SAP reaffirmed its growth outlook for 2025 but adjusted expectations to reflect currency pressures. The company now expects operating profit to reach the upper end of its previous forecast range of $11.95 billion to $12.30 billion.

However, it adjusted full-year cloud revenue toward the lower end of its prior forecast of $25.06 billion to $25.40 billion and raised free cash flow expectations slightly to $9.28 billion to $9.51 billion. The company warned that foreign-exchange movements would subtract about seven percentage points from fourth-quarter cloud growth.

“We closed a great Q3 and are ready for Q4, thanks to a very healthy pipeline,” Klein said.

SAP is Europe’s third most valuable publicly traded company and continues to serve as a bellwether for the region’s technology sector. Its shares have tripled over the past three years.

Photo: SAP