SAP Shares Plunge 14% on Weaker Cloud Backlog Growth
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 29 2026
0mins
Should l Buy SAP?
Source: CNBC
- Disappointing Cloud Growth: SAP's cloud contract backlog grew by only 16% to €21.1 billion in Q4, significantly below the expected 26% growth, leading to a 14% stock plunge, marking the largest single-day drop since October 2020.
- Slight Revenue Increase: Despite the disappointing cloud growth, SAP reported a slight revenue increase to €9.7 billion in Q4, up from €9.4 billion a year earlier, indicating some resilience during its transition.
- Improved Profitability: Operating profit rose from €2 billion to €2.6 billion in Q4, showcasing progress in cost control and operational efficiency, even amid pressures from slowing cloud business growth.
- Cautious Future Outlook: CEO Christian Klein noted that while the current cloud backlog lays a
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Analyst Views on SAP
Wall Street analysts forecast SAP stock price to rise
8 Analyst Rating
7 Buy
1 Hold
0 Sell
Strong Buy
Current: 171.360
Low
30.28
Averages
297.01
High
401.93
Current: 171.360
Low
30.28
Averages
297.01
High
401.93
About SAP
SAP SE (SAP) is a Germany-based application software company. The Company operates through two segments Applications, Technology & Support (ATS) segment and its Core Services segment. The ATS segment covers the Company’s integrated product portfolio and includes cloud subscription offerings, support services, and training solutions. It also encompasses activities related to operating cloud technologies and delivering customer support associated with its software products. The Core Services segment complements the Company’s product portfolio by delivering consulting and premium support services to assist customers in adopting its innovations. Revenue in this segment is primarily derived from professional services and enhanced support offerings, while costs arise from the execution of these service activities.
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.
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- Analyst Rating Upgrade: Needham upgraded Arm's stock to a buy with a price target of $200 per share, representing a 45% upside from the current price of $138, reflecting confidence in its new strategic direction.
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See More
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- Arm Holdings' New Strategy: Arm Holdings has launched its own Arm AGI CPU chip, projecting annual revenue of $15 billion by 2031, raising total revenue to $25 billion, indicating significant growth potential in the AI data center market.
- CrowdStrike's Performance Boost: CrowdStrike's annual recurring revenue surged by 120% in the fourth quarter, receiving an upgrade from Morgan Stanley to a buy rating with a price target raised to $510, highlighting strong growth prospects in the cloud security sector.
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See More
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- Revenue Growth Forecast: Arm Holdings anticipates that its newly launched Arm AGI CPU will drive annual revenue to $15 billion by fiscal 2031, representing over fivefold growth from its current $1.2 billion, indicating strong demand and potential profitability in the AI market.
- Market Share Expansion: The Arm AGI CPU is specifically optimized for AI operations in data centers, featuring 64 CPUs and 8,700 cores, and has already attracted interest from tech giants like Meta and Cloudflare, showcasing its competitive edge in high-performance computing.
- Stock Price Potential: With Arm's current stock price around $157, if it achieves an EPS of $9 in fiscal 2031, applying a conservative P/E ratio of 73 could see the stock soar to $657, reflecting a 318% increase and indicating investor optimism about its future growth.
- R&D Investment Returns: Arm's significant investment in R&D is paying off, with a 26% year-over-year revenue increase in Q3 and a gross margin exceeding 97%, laying a solid foundation for its future chip manufacturing business and enhancing its market competitiveness.
See More
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- Robust Revenue Growth: In the third quarter of fiscal 2026, Arm generated $1.2 billion in revenue, a 26% year-over-year increase, with a gross margin exceeding 97%, showcasing solid financial performance despite high R&D expenditures that limited adjusted EPS growth to 10%.
- AI Chip Launch: Arm announced the debut of its AGI CPU, designed specifically for data centers and featuring 64 CPUs with 8,700 cores, which is expected to drive annual revenue growth to $15 billion over the next five years, highlighting its competitive strength in the AI sector.
- Optimistic Future Outlook: Management forecasts total revenue of $25 billion by fiscal 2031, with an EPS target of $9, suggesting a potential stock price increase of 318% to $657, reflecting the market's optimistic expectations for its long-term growth trajectory.
See More
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- Data Integration Strategy: Muhammad Alam, a member of SAP's Executive Board, stated that acquiring Reltio will help integrate fragmented data across various business units, platforms, and domains, thereby providing the necessary data context for business AI to reach its full potential.
- Transaction Timeline: The deal is anticipated to close in the second or third quarter of 2026, subject to customary closing conditions including regulatory approvals, indicating SAP's long-term strategic commitment to the AI sector.
- Stock Price Reaction: SAP shares fell 1.6% in premarket trading on Friday and have declined over 37% in the past 12 months, reflecting market skepticism regarding the company's AI tools, which could impact future investor sentiment.
See More
SAP Acquires Reltio to Enhance Data Management Capabilities
- Acquisition Context: SAP has announced its acquisition of leading master data management software provider Reltio, aiming to make both SAP and non-SAP enterprise data AI-ready, which will further solidify SAP Business Data Cloud's (SAP BDC) market position.
- Strategic Implications: By integrating Reltio, SAP will enhance customers' data governance capabilities, enabling organizations to unify, cleanse, and harmonize data from various sources, thereby providing high-quality trusted data for enterprise-wide AI and improving decision-making efficiency.
- Technical Integration: Reltio's AI-driven data cleansing and unification capabilities will work alongside SAP Business Suite applications to reduce integration complexity and ensure that enterprises receive consistent and reliable data for successful AI applications, enhancing business process outcomes.
- Future Outlook: The transaction is expected to close in Q2 or Q3 of 2026, with SAP planning to position Reltio as a core capability within SAP BDC, offering a flexible commercial model that allows customers to purchase Reltio separately or alongside other SAP products.
See More
