Thanks to strong growth in cloud services, SAP SE today beat Wall Street expectations on both revenue and profit for its second quarter.

The software maker, Europe’s most valuable tech firm, saw revenue climb 10 percent at constant currency to 6 billion euros ($6.96 billion). Analysts polled by Bloomberg expected 5.88 billion euros. SAP’s sales also topped the average analyst estimate in a Reuters poll and so did its operating profit, which rose 13 percent, to 1.04 billion euros.

The company’s earnings were dampened somewhat by the fact that its legacy software licensing division saw sales decline 5 percent, to 996 million euros. This was met with disapproval on Wall Street, with SAP’s stock sliding close to 4 percent at one point. But the drop in on-premises software sales was almost a side note during the company’s earnings call, which focused on its shift away to cloud subscriptions.

SAP is reaping the rewards of the push. During the second quarter, the company’s cloud division grew revenues by a respectable 40 percent on a constant currency basis, to 1.23 billion euros. New bookings, an important indicator of how well a cloud business doing, climbed 29 percent, to 421 million euros.

SAP’s growth drive is underpinned by two software-as-a-service suites built on its HANA in-memory database. The older and more profitable of the pair is S/4HANA, a collection of so-called enterprise resource planning applications for managing back-office operations such as billing. S/4HANA’s user base swelled to more than 8,900 organizations in the second quarter, a 41 percent gain from a year ago.

The other suite is the C/4HANA bundle of customer relationship management products. It’s a new addition to the company’s existing Customer Experience business, which grew 65 percent in the second quarter to hit revenue of 242 million euros.

Although C/4HANA was only formally introduced six weeks ago, SAP chief executive officer Bill McDermott (pictured) hailed the suite as something of a game-changer during the earnings call. “We are taking the market by storm,” McDermott said. He went on to predict triple-digit growth for the company’s CRM revenue. 

SAP has raised its guidance for full-year profit and sales by a half-percentage-point each. Within that, the company now expects cloud revenue to grow by 34 to 38 percent, up from 31 to 36.5 percent before.

“The 4th generation of enterprise applications has taken another major step forward with C/4HANA,” McDermott added in a statement. “Together with S/4HANA, SAP customers are finally able to focus their entire business on delivering a personalized experience to their customers. SAP is presenting a clear strategy, customers are already validating it in Q2 and we are increasing guidance as a signal that a new wave of growth has been unleashed.”

Photo: SAP