SAP cloud growth beats estimates as Europe's software giant doubles down on AI integration

SAP Delivers Stronger-Than-Expected Cloud Revenue

SAP reported cloud revenue of €5.96 billion ($7 billion) in the first quarter, exceeding the average analyst estimate of €5.9 billion and marking a 19% increase from the same period last year 1

1

2

2

. The Walldorf, Germany-based company posted solid first-quarter earnings of €1.72 per share on total revenue of €9.55 billion, up 6% year-over-year, beating Street expectations of €1.65 per share . Europe's biggest software company demonstrated resilience amid a broader software industry selloff that hit major players including IBM Corp. and ServiceNow Inc., with SAP's American depositary receipts gaining approximately 7% in extended trading after the results were released 1

1

.

Strategic Integration of Artificial Intelligence Drives Performance

Chief Executive Officer Christian Klein attributed the company's momentum to its Business AI initiatives, stating that SAP is "already delivering real outcomes for customers today" and "growing faster than the market" as customers expand across the company's suite and with its AI solutions .

The enterprise software maker has begun integrating artificial intelligence agents into its cloud services, a move that Klein believes will fundamentally transform SAP's business model 1

1

. The company ended the quarter with a cloud backlog of €21.9 billion worth of orders, representing 20% growth from one year earlier, while the current cloud backlog measuring deals coming in over the next 12 months stood at 25% at constant currencies, matching analyst estimates 1

1

.

AI Consumption-Based Pricing Represents Uncharted Territory

Klein is working to convince customers and investors that SAP's transition toward AI consumption-based pricing will ultimately benefit the company, despite what he has warned could bring "short-term pain" 1

1

. The CEO envisions reorienting SAP's business model to charging customers based on their AI consumption rather than traditional subscriptions, though resellers and customers have criticized the company's early AI tools according to Bloomberg reports 1

1

. JPMorgan Chase & Co. analysts including Toby Ogg identified three key challenges facing SAP: decelerating cloud backlog growth, the potential shift toward consumption-based pricing that comes with artificial intelligence, and intensifying competition driving a need for higher investments 1

1

. Unlike the well-understood cloud shift, "a move to a more consumption-based revenue model is uncharted territory," the analysts noted, adding that "today's competition is also moving at a dramatically faster pace than anything we've seen before" 1

1

.

Stock Performance Reflects Industry Anxiety Over Rise of AI Agents

Despite the positive earnings beat, SAP's stock performance reflects broader anxiety in the software industry about the rise of AI agents potentially automating tasks that could lead to fewer software subscribers and lower revenues for incumbents 1

1

. SAP shares closed at €140.70 in Frankfurt and have declined 32% this year, with the company falling out of Europe's Top 10 most valuable companies after being the continent's most valuable software company at one point last year 1

1

. The company maintained its annual revenue forecast for cloud revenue of €25.8 billion to €26.2 billion, which exceeds the analyst consensus estimate of €25.62 billion, though this guidance assumes a near-term de-escalation of Middle East conflicts and the imminent consolidation of Reltio Inc. 1

1

. SAP revealed plans to acquire Reltio Inc., a provider of data integration and management technologies, last month to power its growing fleet of autonomous AI agents and build integrations its intelligent bots need to pull in data from third-party sources .

Company officials indicated they believe revenue forecast growth will begin to accelerate in fiscal 2027 .