Release Date: April 22, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SAP SE (SAP, Financial) reported a 29% increase in its current cloud backlog, reaching EUR18.2 billion in Q1 2025.
- Cloud revenue grew by 26% year-on-year, with the cloud ERP suite showing a 33% increase.
- Operating profit increased by 58% in Q1, driven by strong execution of SAP's transformation program.
- SAP SE (SAP) maintained its position as the number one enterprise application software vendor according to IDC and Gartner.
- The company is seeing strong customer engagement across various industries, with significant deals in the automotive sector and public sector.
Negative Points
- Transactional cloud revenues experienced a slight decline in Q1, reflecting macroeconomic challenges.
- There is uncertainty regarding the impact of global trade disputes and tariffs on future conversion rates and revenue growth.
- The cloud revenue growth decelerated slightly from Q4, partly due to delayed ramp-ups from some deals.
- SAP SE (SAP) faces potential risks from geopolitical tensions and tariffs, which could impact its cloud gross margins.
- The company acknowledges the difficulty in making projections for the entire year due to ongoing macroeconomic uncertainties.
Q & A Highlights
Q: Some companies have reported disruptions at the end of the quarter. Given the current environment, is your assumption that historical close rates will continue still valid?
A: Christian Klein, CEO: Conversations with customers focus on gaining resiliency in supply chains and managing tariffs. Our pipeline remains solid, and we haven't seen deterioration in conversion rates. However, we are closely monitoring geopolitical developments.
Q: Cloud revenue growth decelerated slightly from Q4. What caused this, and when can we expect growth to return to guidance levels?
A: Dominik Asam, CFO: The deceleration was partly due to the timing of deal provisioning from Q4. We expect an acceleration in Q2 as these deals ramp up. Transactional revenues were weak due to macro conditions, but we anticipate improvement as the year progresses.
Q: The current cloud backlog grew by 29%. Has it tracked above expectations, and what are you seeing in terms of market dynamics?
A: Dominik Asam, CFO: The backlog growth was expected due to provisioning lead times. We are on track with our guidance for slight deceleration. We haven't seen significant changes in industry dynamics despite tariff uncertainties.
Q: Can you explain how the Business Data Cloud differs from SAP Datasphere and its potential impact on revenue?
A: Christian Klein, CEO: Business Data Cloud goes beyond Datasphere by providing a semantic layer that unifies SAP and non-SAP data. It enhances AI capabilities and offers significant value, leading to strong pipeline momentum. It is expected to be additive rather than replacing existing offerings.
Q: With the number of large deals increasing, are you seeing any changes in customer behavior regarding deal size and scope?
A: Christian Klein, CEO: We ensure large deals have quantified value and involve key decision-makers. The ramp-up of subscription fees aligns with the value delivered, providing stability even in uncertain times.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
