SAP took advantage of the ongoing Sapphire event in Orlando to update mid-term financial guidance for 2025. The revision of the planning announced in autumn 2020 was necessary in view of the difficult macroeconomic environment and the upcoming sale of Qualtrics to Silver Lake and CPP Investments. The SAP management is now assuming sales of more than 37.5 billion euros in 2025, of which more than 21.5 billion euros should come from the cloud business.
Optimism from SAP management
Compared to the original target, the sale of Qualtrics means that around 2 billion euros in revenue will be lost. At the same time, SAP boss Christian Klein is more optimistic about the development of the continued business areas, which should achieve an additional almost 4 billion euros compared to the earlier assumption. The proportion of more predictable revenues – i.e. recurring subscription income as well as service and support business – will be increased by one point to 86 percent. Only in the forecast for the operating result did management have to make a slight downward correction, since without the contribution from Qualtrics a lower operating profit of around 11.5 billion euros is now being forecast.
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Klein once again clarified to the financial analysts the basic orientation of the product portfolio around ERP and the Business Technology Platform (BTP) as the foundation. The growth formula is simple: first switch from the on-premises world to S/4HANA Cloud, in the second step adapt the BTP for integration and expansion projects and, last but not least, use this as a basis to tap cross-selling potential through additional cloud services . Klein is counting on existing customers, who initially introduce the private edition of the ERP cloud due to their individual adjustments, sooner or later switching to the public cloud variant as the (process) standardization progresses.
Above analysts’ expectations
With the under the Sapphire Incidentally, SAP’s updated financial targets are slightly above the expectations of the financial analysts. However, the truth is that the company is benefiting from the more favorable currency environment compared to the figures published in October 2020. Because with a view to the current exchange rates, only 1.10 dollars per euro are estimated.
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In view of the strong business development hoped for and the upcoming sale of Qualtrics, SAP is also launching another share buyback program to maintain the price. Up to 5 billion euros are earmarked for this by 2025 – provided the sale of the US subsidiary goes as planned. The new share buyback program builds on the buybacks carried out in 2020 and 2022 of around 14 million shares and around 16 million shares, respectively, for EUR 1.5 billion.
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