SAP Cloud Backlog Growth Misses Expectations, Shares Drop
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1h ago
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Source: seekingalpha
- Cloud Business Growth: SAP's current cloud backlog grew by 16% to €21.05 billion in Q4, with a 25% increase at constant currencies, yet it fell short of CEO's target of 26%, indicating potential market demand uncertainties.
- Financial Performance: In Q4, non-IFRS EPS rose 16% year-over-year to €1.62, while total revenue increased by 3% to €9.68 billion, demonstrating the company's ongoing growth potential in the cloud sector.
- Future Outlook: SAP expects cloud revenue for 2026 to range between €25.8 billion and €26.2 billion, reflecting a 23% to 25% growth from 2025, although current cloud backlog growth is anticipated to slightly decelerate, showcasing a cautiously optimistic view on future performance.
- Share Buyback Program: SAP announced a new share repurchase program worth up to €10 billion, scheduled to commence in February and expected to be completed by the end of 2027, aimed at enhancing shareholder returns and boosting market confidence.
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Analyst Views on SAP
Wall Street analysts forecast SAP stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for SAP is 297.01 USD with a low forecast of 30.28 USD and a high forecast of 401.93 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
8 Analyst Rating
7 Buy
1 Hold
0 Sell
Strong Buy
Current: 233.940
Low
30.28
Averages
297.01
High
401.93
Current: 233.940
Low
30.28
Averages
297.01
High
401.93
About SAP
SAP SE (SAP) is a Germany-based company. The Company provides business application software. It operates through three segments: Applications, Technology and Services, which engages in the sale of software licenses, subscriptions to its cloud-based applications and related services, primarily support services and various professional services, and support services, as well as implementation services for its software products and educational services on the use of its products; the SAP Business Network segment, which includes its cloud-based collaborative business networks and services related to the SAP Business Network, including cloud applications, professional services and educational services, as well as the Company markets and sells cloud offerings developed by SAP Ariba, SAP Fieldglass and Concur; and the Customer Experience segment, which comprises on-premise and cloud-based products that execute front office functions across the entire customer experience.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
SAP to Announce Q4 Earnings on January 29
- Earnings Announcement: SAP SE is set to release its Q4 earnings on January 29 after market close, with consensus EPS estimates at $1.72, reflecting a 22.9% year-over-year growth that underscores the company's ongoing growth potential in the software sector.
- Revenue Expectations: Analysts forecast Q4 revenue to reach $11.68 billion, representing a 24.5% year-over-year increase, indicating SAP's solid position in a competitive market landscape.
- Historical Performance: Over the past two years, SAP has beaten EPS estimates 75% of the time and revenue estimates 88% of the time, demonstrating the company's reliability in financial forecasting and bolstering market confidence.
- Estimate Revisions: In the last three months, EPS estimates saw one upward and one downward revision, while revenue estimates experienced three upward and two downward revisions, reflecting market divergence and attention on SAP's future performance.
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SAP Reports Mixed Q4 Results, Stock Plummets
- Earnings Highlights: SAP's Q4 revenue rose 3% year-over-year to €9.68 billion, with non-IFRS EPS increasing 16% to €1.62; however, revenue missed market expectations, leading to a 14.88% drop in stock price to $200.98, marking a new 52-week low.
- Cloud Business Performance: Cloud revenue grew 19% year-over-year to €5.61 billion, while total cloud backlog increased 22% to €77.29 billion; however, the growth rate of current cloud backlog was slower than anticipated due to a shift towards larger digital transformation projects, indicating changing market dynamics.
- Future Outlook: SAP projects 2026 cloud revenue between €25.8 billion and €26.2 billion, with total cloud and software revenue expected to be between €36.3 billion and €36.8 billion, reflecting confidence in future growth despite challenges from accelerated customer migration to the cloud.
- Share Buyback Program: The SAP Executive and Supervisory Boards approved a share buyback program of up to €10 billion, set to begin in February 2026 and conclude by the end of 2027, aimed at enhancing shareholder value and stabilizing stock prices.
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