SAP SE (NYSE: SAP) stock rose 0.22% after the company raised its guidance both for this year and for 2020, citing accelerating cloud sales. New cloud bookings, which is a keenly watched metric because it indicates future revenue growth, has risen 29 percent, slower than 40 percent sales growth in the segment. The company is betting big on its cloud business for future sales growth. The company is looking to expand SAP’s cloud-based services to challenge rivals such as Salesforce.com Inc. and Oracle Corp. SAP this year has made its biggest acquisition in more than three years when it bought Callidus Software Inc. for about $2.4 billion, which let them gain access to new sales analytics and customer engagement tools. Europe’s biggest technology company expects cloud subscriptions to account for about 29 percent of total revenue by 2020, up from around 16 percent in 2017.
Furthermore, New cloud and software order entry grew even faster at 12%, and due to a higher mix of cloud and services revenue, operating profit surged 12% while the company also expanded margin. Some of the most prestigious brands in the world chose SAP solutions in Q2, including Chevron, Thomson Reuters, McDonald’s China, Whirlpool, and the U.S. Navy, etc. NL is now live, and they are the biggest SAP S/4HANA installation in the world.
Moreover, SAP now expects non-IFRS cloud subscriptions and support revenue of as much as 5.2 billion euros ($6.05 billion) this year, up from a previous maximum expectation of 5.15 billion euros. It has also raised its 2020 ambition for cloud subscriptions and support revenue by 200 million euros to as much as 8.7 billion euros.
Additionally, SAP had a very strong performance in the EMEA region, with cloud and software revenue growing 12%. Cloud revenue grew by 46%, with Germany and the U.K. being highlights. In addition, the company had strong double-digit software revenue growth in the U.K., and the Middle East and Germany had another strong quarter, with solid single-digit software license growth. SAP also had a solid performance in the Americas region despite a significant currency headwind. Cloud and software revenue grew by 8%. Cloud revenue increased by 35%, due to a very strong performance in Brazil. In the APJ region, the company had a robust performance. Cloud and software revenue was up 11%. Cloud revenue grew by 52%, with China and Japan being highlights. For software revenue, Australia, China, and India had impressive quarters and grew each by double digits.
Meanwhile, SAP’s flagship S/4 Hana software has added about 600 customers in the April-June period to reach more than 8,900 users, which is a bigger intake than in the previous quarter. The software allows businesses to run tasks on their own machines or in a cloud-computing arrangement hosted by SAP or one of its partners.