Europe’s biggest software company SAP SE delivered record-breaking quarterly revenue after surpassing the €10 billion ($11.2 billion) barrier for the first time earlier today, while delivering a 26% increase in its current cloud backlog and lifting its revenue outlook for the full year.
The Germany-based firm reported earnings before certain costs such as stock compensation of €1.89 per share on total sales of €10.27 billion, outperforming analysts who had expected earnings of just €1.83 per share on revenue of €10.10 billion.
SAP said its third-quarter cloud revenue increased 25% to €6.67 billion, while its non-IFRS operating profit rose to €3.03 billion, up 18% from the same period one year earlier. The company’s cloud backlog rose 26% to €24.11 billion, ahead of the 24% to 25% growth forecast by analysts. The company also maintained its full-year operating profit outlook at €11.8 billion to €12.2 billion, which it first revealed in July.
SAP’s orderbook is seen as a bellwether for broader enterprise software spending because its software sits at the heart of many of the world’s largest companies, powering their accounting and payroll systems.
Chief Executive Christian Klein (pictured) said the results highlight the success of the company’s “autonomous enterprise” strategy, which was first laid out in May during its Sapphire customer conference. One of the key elements of that strategy is SAP’s autonomous AI agent offering Joule, a powerful productivity and development tool that can connect to more than 70 AI models. It’s designed to act as a conversational interface layer for customers, working alongside SAP applications rather than within them. “AI was the main driver behind customer’s move to the cloud during the quarter,” Klein told analysts in a conference call, adding that hundreds of customers have signed up for new subscriptions so they can access Joule.
SAP Chief Financial Officer Dominik Asam said the fourth quarter would be critical in determining how the rest of the company’s financial year lands. But he warned that the company is operating amid a gloomy economic backdrop, with rising oil prices and U.S. interest rates that are “starting to develop teeth.”
During the quarter, SAP’s cloud growth was driven in part by customers returning from “financial distress,” Asam said. They helped it to expand its profit margin to 29.5% from 28.3% in the previous quarter. The company’s free cash flow increased 36% to €1.72 billion.
Looking to the end of the year, Asam said he expects SAP to deliver fiscal 2026 subscription revenue at the upper end of its forecast range of between €25.8 billion and €26.2 billion, growing by between 23% and 25%. When taking into account the decline of its classic perpetual license business, full year revenue should fall between €36.3 billion and €36.8 billion, up by between 12% and 13%.