SAP SE Earnings - Q3 2025 Analysis & Highlights
Key Takeaways
SAP SE's Q2 2025 earnings call highlighted strong financial performance, driven by cloud revenue growth and cost discipline, amid macroeconomic uncertainties and strategic investments in AI and data. The company maintained its full-year outlook, focusing on resilience and innovation.
Key Financial Results
Cloud revenue increased by 28% year-on-year.
The cloud ERP suite grew by 34% in Q2.
Total revenue increased by 12%.
Current cloud backlog grew by 28%, reaching €18.1 billion.
Non-IFRS operating profit increased by 35% to €2.6 billion.
Operating cash flow increased by 71% to €2.6 billion.
Free cash flow increased by 83% to €2.4 billion.
Non-IFRS earnings per share increased to €1.50.
Business Segment Results
The cloud ERP suite accounted for 86% of total cloud revenue.
Software licenses revenue decreased by 13%.
APJ and EMEA regions showed strong cloud revenue performance.
Americas showed solid cloud revenue performance.
Capital Allocation
The company is focused on protecting its bottom line and free cash flow in 2025.
Share-based compensation expenses were reduced by €331 million in the first six months of 2025.
Industry Trends and Dynamics
Digital sovereignty is a growing debate, with SAP offering sovereignty over the entire stack.
Business AI is driving productivity improvements for SAP and its customers.
Uncertainty in global markets is causing extended approval workflows.
Competitive Landscape
SAP is the only vendor offering sovereignty over the entire stack.
SAP's prices are increasing quarter-over-quarter despite competitor moves.
Macroeconomic Environment
Uncertainty in global markets is impacting customer decisions.
Trade policy uncertainty is contributing to elongated sales cycles in the US public sector and industrial manufacturing.
The company is preparing for less favorable outcomes due to external conditions.
Growth Opportunities and Strategies
Strategic partnership with Alibaba to address the market potential in China.
Business Data Cloud (BDC) is a key component in many deals, with a skyrocketing pipeline.
Business AI is being integrated into the Business Suite, with over half of cloud order entry volume including AI use cases.
Joule will be available across SAP and non-SAP systems starting in Q3.
The company is transforming its workforce with reskilling and hiring in data and business AI.
Focus on simplification and AI-enabled go-to-market transformation.
Financial Guidance and Outlook
The 2025 outlook remains unchanged across all metrics.
Focus on disciplined execution, cost control, and protecting the bottom line and free cash flow.
The company aims to decouple expense growth from accelerated total revenue growth.
Operating leverage, i.e., the increase in total expenses versus the increase in revenues, will be contained in a range of 80% to 90% in the coming years.
