SAP SE (NYSE:SAP) stock rose 1.42% (As on January 29, 11:20:36 AM UTC-4, Source: Google Finance) after the company raised its fiscal 2025 outlook, forecasting a significant increase in operating profit on accelerating cloud revenue growth and its strengthened position in business AI and data capabilities. The enterprise resource planning giant’s operating margin climbed to 26% from 23.3% a year earlier, beating estimates of 24.5%. Cloud revenue totaled €4.67 billion ($4.87 billion) in the quarter and €17.21 billion ($17.96 billion) for the year, up 26%. Meantime, Cloud ERP Suite revenue rose 34% in constant currencies for the year. Software license revenue declined 19%, to €680 million ($710 billion), reflecting SAP’s shift from software licenses to cloud subscriptions. Total cloud backlog now stands at €63 billion, up 40%. Revenue growth has returned to double-digits. For fiscal 2024, SAP reported revenue of €34.17 billion ($35.66 billion), up 10%, with cloud and software revenue growing 11%, to €29.83 billion ($31.13 billion).
Total revenue of €9.38 billion ($9.79 billion) in constant currencies beat Wall Street forecasts of 9.1 billion euros, while operating profit jumped 24%, to €2.44 billion ($2.55 billion), ahead of analyst estimates of €2.25 billion ($2.35 billion).
Meanwhile, the company said it’s also making progress on its plans to embed artificial intelligence throughout its product portfolio. It said half of its cloud orders in the fourth quarter included AI features. The company is flexible when it comes to AI infrastructure and large language modules and they benefit from cost reductions and progress. The CEO made an oblique reference to a forthcoming “game-changing innovation” to be announced on Feb. 13. Klein said the product “will harmonize structured and unstructured data, SAP and non-SAP data with the relevant semantics, and make AI agents much more powerful. It will become the super orchestrator of these agents.”
The company expects fiscal 2025 operating profit to reach 10.3 billion euros – 10.6 billion euros ($10.75 billion- $11.06 billion), a jump of 26% –30% at constant currencies from 2024.
SAP had earlier said it was aiming for operating profit of around 10.2 billion euros, along with overall revenue of over 37.5 billion euros and more than 21.5 billion euros in cloud revenue.
Cloud revenue is projected to grow by 26–28% to 21.6 billion euros – 21.9 billion euros in 2025, supported by robust customer demand for its flagship Cloud ERP Suite and its RISE with SAP offering, which helps clients transition to cloud-based enterprise solutions.