Forecast raised: SAP exceeds expectations in series

Forecast raised
SAP exceeds expectations in series

Europe’s largest software manufacturer SAP earns significantly more than expected in the third quarter and is increasing the business outlook. The cloud business, in particular, is making sales bubble up.

The software group SAP has raised its targets for the third time within a few months. Due to the expected further growth in revenue in the cloud business, the Walldorf-based Dax group is forecasting higher profits and sales than before for the year as a whole, as SAP announced on Tuesday evening.

“Our strategy is clearly working,” said CEO Christian Klein. “We are experiencing record demand for our applications and our platform.” Business in the cloud is becoming increasingly important to the Oracle rival. The currency-adjusted operating profit is expected to be in a range of 8.1 to 8.3 billion euros in 2021.

SAP 116.94

Most recently, SAP had raised its earnings forecast in July to 7.95 to 8.25 billion euros. Currency-adjusted cloud and software revenues are expected to increase to between EUR 23.8 billion and EUR 24.2 billion for the year as a whole. So far, SAP was aiming for 23.6 to 24.0 billion euros.

There is still a long way to go before we have set ourselves the goal

“Our cloud business is growing faster and faster and has led to our improved outlook for the full year,” said SAP CFO Luka Mucic. The revenue generated by the cloud alone is expected to rise to 9.4 to 9.6 billion euros in 2021 – also more than previously forecast. However, SAP is still a long way from its goal of increasing cloud revenues to more than 22 billion euros by 2025.

The board of directors wants to orient the almost 50-year-old company more towards the cloud and to leave the traditional software business with license models for server-based computer programs behind. A business transformation program is intended to lure more of the approximately 400,000 corporate customers into the data cloud and encourage them to use rented applications on the Internet, which leads to a shift in sales.

The offer continues to meet with high demand, announced SAP. In the third quarter, the currency-adjusted earnings climbed according to preliminary figures by two percent to EUR 2.10 billion. After adjusting for currency effects, sales increased by five percent to 6.84 billion euros. The so-called cloud backlog – a kind of order backlog for the next twelve months – increased by around a quarter to 8.17 billion euros. With this metric, SAP aims to provide investors with an insight into progress in moving business to the cloud.

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