SAP’s Q3 results show solid cloud growth, but is it good enough for THE cloud company?

Picture credit: "SAP Logos", by "Marc Smith", used under CC BY / Modified from original

SAP has released its third quarter results, with cloud subscriptions and total revenue going up over 2013 figures, but software revenues taking a downturn.

Cloud subscriptions and support hit €738 million (£584.1m), a jump of 51% from Q313’s €488m (£386.2m), at an increase of 51%. Software revenues were at €2.53bn, a downturn of 3% from €2.61bn in 2013.

Total revenue was up 3% at €12.1bn, but operating expenses also increased to €9.53bn, up 5%. Profit after tax was down, at €1.97bn compared to €2.01bn. SAP gained 2774 employees between Q313 and Q314.

 “We are accelerating our shift to the cloud with more than 40% revenue growth in the cloud,” said SAP CEO Bill McDermott in a statement. “SAP is THE cloud company powered by SAP HANA helping customers run simple with over 44 million cloud users and the world’s largest business network.

“Our portfolio depth in the cloud, global scale and industry domain expertise are the bedrocks that separate us in the marketplace,” he added. “With SAP HANA and the Business Network, SAP will continue to shape the future of the enterprise software industry.”

Analysis

Even as software numbers continue to fall, it represents good news in terms of SAP’s master plan. The company, like Oracle and IBM, is engaged in a long term battle to shift its key revenue streams to the cloud and provide a seamless transition.

Oracle announced its Q1 financial results this time last month. New software license revenues were down 2%, yet overall net income practically stood still, noting a very slight decrease in constant currency. The new CEOs, Safra Catz and Mark Hurd, noted immediately that the first quarter was traditionally a leaner financial time, as well as arguing that cloud software will bolster the figures in due course.

SAP seems a little further down this path than Oracle, and the firm’s recent partnership with IBM, where SAP HANA will be delivered through IBM’s cloud, solidifies this.

SAP and IBM’s partnership goes back more than 40 years, so the deal makes sense from that standpoint. Doug Clark, UK&I cloud leader at IBM, told CloudTech at the time: “We are trusted by a lot of clients who live or die by that SAP system being up and running. This is SAP’s biggest news sitting on one of IBM’s biggest investments.”

The company’s first quarter figures, released back in April, started the trend which the Q3 numbers continue. Back in June Kevin Kimber, SAP UK&I managing director, told CloudTech the project was “hugely ambitious” and added the agile startup culture was something the nearly 70,000 strong German firm was aspiring to.

“The investments we’re making from an acquisition perspective, the organic developments we’re making, they’re all cloud first,” he said.

Last month SAP acquired software firm Concur Technologies for an estimated $7.4bn, the biggest buyout in its history, to bolster its cloud play. It’s one of many good signs – and both sets of numbers, cloud and software, are going in the right direction.

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