SAP Shares Drop 13% Following Earnings Report Amid Rising Cloud Revenue Worries.
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1d ago
0mins
Source: Barron's
- SAP's Stock Performance: SAP's stock is on track for its largest decline in over five years following its earnings report.
- Earnings Report Highlights: The company reported better-than-expected earnings, indicating some financial strength.
- Cloud Revenue Concerns: Despite the positive earnings, cloud revenue growth did not meet market expectations, raising concerns among investors.
- Market Reaction: The combination of strong earnings but disappointing cloud performance has led to significant negative market reaction.
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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: 200.210
Low
30.28
Averages
297.01
High
401.93
Current: 200.210
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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Citizens Downgrades SAP to Market Perform After Disappointing Q4 Results
- Rating Downgrade: Citizens has downgraded SAP from Market Outperform to Market Perform due to disappointing Q4 revenue results and cloud backlog growth falling short of market expectations, indicating increasing challenges for the company.
- Earnings Forecast Revision: The brokerage lowered its 2026 non-IFRS EPS estimate from €6.87 to €6.84, below the consensus of €7.15, and also reduced the 2027 estimate from €8.00 to €7.41, reflecting a cautious outlook on the company's future growth.
- Cloud Growth Slowdown: SAP's current cloud backlog growth rate of 25% is below the expected 26%, marking the slowest growth in nine quarters, which suggests that the company is experiencing slower progress in larger transformation projects that may impact future revenue growth.
- Geopolitical Impact: Analysts noted that rising geopolitical tensions have led customers to prioritize sovereign SaaS options, potentially increasing competitive pressure on SAP and affecting its long-term strategic positioning.
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