SAP breaks €5bn in quarterly cloud and software revenue – but profits see slight dip

James has more than a decade of experience as a tech journalist, writer and editor, and served as Editor in Chief of TechForge Media between 2017 and 2021. James was named as one of the top 20 UK technology influencers by Tyto, and has also been cited by Onalytica, Feedspot and Zsah as an influential cloud computing writer.

SAP has claimed it is the ‘fastest growing cloud company at scale’ in enterprise software applications after breaking the €5 billion barrier for quarterly cloud and software revenues.

The figure of €5.01bn (£4.4bn) represents an increase of 7.5% on this time last year, and an increase of 1.3% on the previous quarter. Total revenues for the company were at €6.02bn, meaning cloud and software was at 83% of all earnings for the quarter.

Speaking to analysts following the announcement, SAP CEO Bill McDermott said the company was in the position it needed to be. “With 41% cloud revenue growth in Q3, SAP has the fastest cloud growth of any peer at scale in the enterprise applications software industry,” said McDermott.

“Three years ago we said that cloud revenue would overtake license revenue in 2018. Today the fast adoption of our cloud solutions and business networks has accelerated this positive development,” McDermott added. “The resilience of our license business remains ever steady even as we grow the cloud beyond expectations.

“Cloud has a higher lifetime value, drive[s] faster consumption of innovation and has higher predictability going forward. We planned for this transition – we guided for it and we are delivering it.”

This publication duly reported SAP’s prediction that cloud profits would exceed software license revenues by 2018 back in January 2015 – and it appears to be on track for that side. That said, it is never fully clear cut to tell; apart from Amazon, which puts AWS revenues in a clear segment, virtually every other primary vendor obfuscates its figures to some degree. Microsoft, for instance, reveals a percentage point increase for Azure but hides its overall numbers in two buckets. For SAP, describing those revenues as ‘cloud and software’ makes sense in this context.

SAP raised its 2018 outlook for the third time this year – but despite this, profits were slightly down, with operating profit declining 6%, from €1.3bn to €1.2bn.

Chief financial officer Luka Mucic reiterated that cloud was ‘where the long-term value was’ and that SAP’s ‘intelligent enterprise strategy’ was ‘resonating broadly and propelling strong adoption of [their] suite in the cloud.’ Responding to an analyst question around license performance and support revenue, Mucic added that “the market needs to expect a gentle decline in growth rates of support revenues.”

You can read SAP’s full financial results here.

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