SAP cloud revenue surges 22% as enterprise software giant navigates AI transformation costs

SAP's cloud beat calms AI fears, but profit outlook dips

SAP's cloud business is still growing fast, and that was the number investors wanted. Europe's biggest software company beat cloud-revenue forecasts and lifted its backlog 26%, easing fears that AI will hollow out enterprise-software subscriptions. The stock, down 35% this year on that very worry, jumped, even as SAP trimmed its 2026 profit guidance. SAP gave investors the number they wanted. Europe's biggest software company said cloud revenue grew 22% to €6.28 billion in the second quarter, beating forecasts, SAP announced. Its cloud backlog, a measure of future sales, jumped 26%. The stock rose more than 6% in Frankfurt. That relief is the story. SAP's shares are down about 35% this year, Bloomberg reported, on fears that AI will hollow out the enterprise-software subscription model SAP is built on. It reported in a jittery week of tech earnings. A strong cloud quarter is the clearest answer SAP can give: its customers are still signing up, not walking away. A beat, and a guidance cut The picture was not all rosy. Operating profit rose 7% to €2.74 billion, but missed analyst hopes. SAP also trimmed its 2026 profit outlook to €11.8-12.2 billion, the Wall Street Journal reported. The cut reflects the cost of two July acquisitions: the data firm Dremio and the AI startup Prior Labs. SAP is spending hard to keep up. Chief executive Christian Klein has diverted budget and reshuffled management to fund an AI push, and the company cut hiring and travel to pay for it. It is pushing customers off older on-premise software and into the cloud. It will soon charge more to maintain legacy systems. The AI story investors aren't sold on The bigger question is whether SAP's own AI is any good. Klein casts it as an "Autonomous Enterprise" that grounds AI in a company's core data. But some customers have questioned the value of SAP's early AI tools, and analysts are lukewarm. "SAP still needs to do more to make its AI story compelling," said Rebecca Wettemann of Valoir. "All its software running on the same platform isn't a compelling reason to run enterprise AI there." So the quarter cuts both ways. The cloud numbers say AI has not broken SAP's business, and investors were glad to hear it. But SAP has not yet shown that AI will grow it either, even as it spends to fend off rivals like Anthropic. For now, "we are not the disruption's victim" was enough.

SAP turns in an AI-powered Q2 as CEO Christian Klein dives into the tokenomics debate and its impact on strategy

Wall Street ended the week on a happier note as SAP's quarterly numbers and AI market assessment calmed investors and didn't result in the usual meltdown over forward growth projections. Total revenue rose nine percent year-on-year to €9.88 billion with cloud revenue delivering a strong increase of 22% to hit €6.28 billion, while software licence revenue fell 32% to €131 million. Net income came in at €2.21 billion. AI and SAP Business Data Cloud were embedded in more than 90% of the quarter's 50 largest deals, while cloud backlog improved, noted CEO Christian Klein: Current cloud backlog (CCB) grew 26%, an acceleration compared to Q1. And after two quarters where our CCB was lagging behind cloud revenue growth, it was a welcome trend reversal in this important forward-looking indicator, a great result, especially given the volatile environment. Klein picked out a number of customer use cases to illustrate enterprise adoption of AI in practice: Amadeus, a platform for global travel, developed an AI agent that autonomously reconciles unstructured payment data already clearing around 40,000 incorrect transactions. One example from our Business AI platform - to prepare for business AI, Norsk Hydro transitioned from a legacy BW to an end-to-end data platform with BTP. This delivered significant agility, cutting BI solution build time by around 75% and accelerating report creation time by 50%. Moving on to industry AI, with NTT DATA, Denmark's largest wholesaler for steel and technical equipment, Lemvigh-Muller deployed custom AI agents to verify purchasing orders. The solution achieved over 90% touchless processing and 98% matching accuracy. He added: Key [AI] wins included PwC, one of the world's largest professional services firms. They selected our AI to transform a complex billing process, cutting a 35-minute task to just five minutes while improving accuracy and end user satisfaction. Travel platforms Booking.com and GOL, as well as Oki Electric Industry selected many of our LOB (line of business) and industry AI offerings in addition to PC. Our Software and Cloud offerings also gained significant momentum with key wins, including companies like Airbus. Successful go-lives included Fonterra, Dohler and Natura Cosmeticos. Tokenomics The firm picked up on the current tokenomics debate vibe as Klein cited the quarter's introduction of the Autonomous Enterprise: It resonated strongly because it gets to the root of why enterprise AI is so hard and what that means for our customers. The reality for many enterprises today is that LLMs (Large Language Models) don't understand business data, processes and governance. AI token spend doesn't mirror outcomes. Log-in to single frontier vendors is a growing concern and AI sovereignty is becoming more important. SAP CFO Dominik Asam added: The recent debate about exploding token costs at most enterprises supports our strategy of leveraging a unique combination of both deterministic, highly scalable and low-cost mission-critical enterprise applications on the one hand and probabilistic agentic AI-powered solutions on the other. We're highly assured deterministic solutions are not yet attainable and heavy human intervention is the baseline, AI can very effectively compete with labor. This ambi-dexterity at unrivaled levels of functional breadth, reliability, semantical richness, industry-specific process know-how, cost competitiveness and last but not least, enterprise-grade governance makes us the partner of choice for those enterprises who do not see AI as a destination, but a means to reach better efficiency. All this without enterprise grade assurance requirements at risk. We are more convinced than ever that our strategy not to be locked into any generic large language frontier model, but to flexibly benefit from the vibrant competition amongst them in terms of both performance but also cost, is the right one. That means, he went on: We are frankly optimizing massively now on how we spend tokens by virtue of a very tight controlling. We can now, on a very granular basis, see who's using what tool and what is output driven here, and we will funnel the tokens in a way that gives us a better bang for the buck. And there are also measures on cost containment to really make sure that we focus our resources where it really matters. Tokenomics is also shaping hiring strategies, observed Klein: In the last 12 months, indeed, we still invested into new job profiles in R&D, data scientists, data engineers, we invested into full stack developers for industry AI. But we will now continuously heavily slow down the hiring for the other profiles because now that the AI productivity is kicking in and the highest token consumption is in R&D, we see productivity gains of an average of 30%. So there is no need anymore now to hire additional people. You also see that the costs are more up than the headcount. That is actually the token effect, because we charge the tokens, of course, to the functions who are using it...You can expect now in the next 12 months, not a further increase of headcount. It's just about getting a few experts in and then, of course, driving the productivity of R&D up in line with the token consumption. Klein concluded: In the age of agentic AI, SAP is leading the way. The autonomous enterprise is anchored in AI agents that can run end-to-end business processes accurately, compliantly and cost-effectively and always with the human in the loop. SAP successfully completed our transformation to the cloud, and we will once again successfully transform in the AI era to deliver accelerated growth and profitability. My take We are balancing AI to consumption and own headcount in the right way. A good solid quarter, nicely done, nothing to scare the horses with here,

SAP shrugs off AI eating software fears with big earnings beat

Enterprise software giant SAP SE's stock inched up in late trading today after it shook off concerns that its business might become a victim of the artificial intelligence boom by posting solid results in its latest earnings report. The strong numbers posted by SAP today suggest that AI tools that can automate some kinds of business work and processes aren't yet replacing its software, which spans cloud services and operating systems for large enterprises. The company reported second-quarter earnings before certain costs such as stock compensation of €1.89 ($2.15) per share, surpassing Wall Street's consensus estimate of €1.68 by a wide margin. Meanwhile, SAP's revenue increased 11% from the same period one year ago to €9.88 billion, beating the €9.85 billion analyst target. Those numbers helped SAP to post an operating profit of €4.16 billion in the quarter, up from a profit of just €3.54 billion one year ago. Investors liked what they saw, and SAP's American depository receipts gained more than 2% in the after-hours trading session. SAP's cloud business unit, which is by far its largest segment, saw sales grow 24% from a year earlier. Meanwhile, its cloud backlog jumped 26% to €22.9 billion, the company said. The business has grown immensely in recent years as more of SAP's customers shift their data from on-premises database systems to SAP's cloud platform, which generates a recurring source of revenue. However, that shift has come at the expense of the company's software support revenue, which declined 7% in the quarter. Like many software companies, SAP has been under pressure for the last year amid fears that AI tools will one day, perhaps even soon, replace the need for traditional software tools. After all, why pay to use an expensive enterprise resource planning platform when you can simply have an AI coding bot create one for you for free? Fortunately for SAP, doing that isn't nearly as simple as it seems. However, its stock has still declined 40% in the year to date, primarily due to these concerns. But SAP is trying to change the narrative, and its management insists that it can actually become one of the leading AI providers. Chief Executive Christian Klein (pictured) argued that generic AI tools simply cannot match the capabilities and reliability of SAP's embedded AI solutions. "Customers are choosing SAP to enable accurate and compliant AI outcomes grounded in their most critical business processes and data," he insisted."We delivered another quarter of strong current cloud backlog growth, up 26% at constant currencies. This performance is underpinned by our Autonomous Enterprise strategy with strong momentum across our Autonomous Suite as well as our Business AI Platform." SAP did not bump up its revenue guidance, instead just reiterating an earlier forecast for its full-year revenue and cash flow. However, it did reduce its guidance for non-adjusted operating profit by €100 million, following its acquisitions of Dremio Inc. and Prior Labs GmbH in May.

SAP trims 2026 profit goal, signalling cost of AI push

Unlike consumer AI tools, enterprise AI depends heavily on structured, secured and regulatory compliant company data. Vendors ⁠such as SAP are spending on infrastructure and automation systems that matches those demands to connect AI tools and ⁠protected data so customers can apply AI to finance, supply chain and HR processes. SAP trimmed its 2026 operating profit outlook on Thursday as recent AI-focused data acquisitions weighed on earnings, showing the near-term cost for enterprise software makers of adapting their products for artificial intelligence. The German company ⁠cut its ⁠2026 non-IFRS operating profit outlook to 11.8 billion-12.2 billion euros, from 11.9 billion-12.3 billion euros, citing a more than 100 million euro ($113.76 million) dilutive impact from its Dremio and Prior Labs acquisitions. Unlike consumer AI tools, enterprise AI depends heavily on structured, secured and regulatory compliant company data. Vendors ⁠such as SAP are spending on infrastructure and automation systems that matches those demands to connect AI tools and ⁠protected data so customers can apply AI to finance, supply chain and HR processes. "The only change is the operating profit adjustment I just explained, driven solely by mergers and acquisitions," CFO Dominik Asam said in a press call. SAP left its 2026 cloud revenue target unchanged at 25.8 billion-26.2 billion euros as second quarter rose 24% year-on-year at constant currencies to 6.28 billion euros. Current cloud backlog rose 26% at constant currencies to ⁠22.93 billion euros, signalling resilient contracted cloud revenue over the next 12 months. Cloud ERP Suite revenue rose 27% at constant currencies to 5.53 billion euros, while software licence revenue fell 32% at constant currencies to 131 million euros, reflecting SAP's shift from upfront licences to subscriptions remained stable with sustained client spending.