SAP SE (NYSE:SAP) stock rose 0.40% (As on July 21, 11:41:16 AM UTC-4, Source: Google Finance) after the company posted better than expected result for the second quarter of FY 23. Current cloud backlog grew by 21% to €11.54 billion and was up 25% at constant currencies. SAP S/4HANA current cloud backlog was up 65% to €3.72 billion and up 70% at constant currencies. In the second quarter, cloud revenue was up 19% to €3.32 billion and up 22% at constant currencies. SAP S/4HANA cloud revenue was up 74% to €823 million and up 79% at constant currencies. Software licenses revenue decreased by 26% to €316 million and was down 24% at constant currencies. Cloud and software revenue was up 5% to €6.50 billion and up 8% at constant currencies. Services revenue was up 4% to €1.05 billion and up 7% at constant currencies. Total revenue was up 5% to €7.55 billion and up 8% at constant currencies. Free cash flow in the second quarter increased significantly to €604 million, driven by the strong expansion of operating profit and a reduction of payments for, amongst others, share-based compensation, capex and leasing. For the first six months, free cash flow was up 19% to €2.56 billion.

SAP in the second quarter of FY 23 has reported the adjusted earnings per share of €0.62 (€1 = $1.1128), beating the analysts’ estimates for the adjusted earnings per share of €0.54. The company had reported the adjusted revenue of €7.55 billion in the second quarter of FY 23, beating the analysts’ estimates for revenue of €7.2 billion.

SAP has modestly hiked its full-year operating profit outlook to a range of €8.65-8.95B, up from the prior forecast for €8.6-8.9B. However, the cloud revenue forecast was slashed to €14.1B, down from the prior forecast of €14.2B.

Stifel analysts said the results were “solid given the macro” environment. Oppenheimer analysts added:

“With respect to the broader SaaS/Applications group, we don’t believe SAP’s 2Q results are a harbinger of bad things to come, but rather idiosyncratic. For example, a slowing economy and shift to hybrid work is delaying and/or reducing in scope large transformational deals and T&E and procurement spending/volumes for SAP. Maintain Perform.”

Meanwhile, the company has announced the completion of the sale of its stake in Qualtrics at a price of US$18.15 in cash per share. The closing of the transaction contributed an after-tax gain on sale of approximately €3.2 billion (IFRS) and approximately €2.6 billion (Non-IFRS) to SAP’s results.