SAP Exceeds Analyst Expectations with Strong Q4 Results

January 27, 2023
SAP announced impressive Q4 revenue and operating profit, surpassing analysts’ predictions. The company also made adjustments to its 2025 targets and revealed plans for a new restructuring program.

Shares of German business-software company SAP saw a 7.2% increase to EUR160.06 at 0820 GMT on Wednesday, following the stellar performance in the fourth quarter. Since the beginning of the year, the stock has surged by 15%.

SAP reported a total revenue of EUR8.47 billion ($9.19 billion) for Q4 2022, surpassing the previous year’s figure of EUR8.06 billion. Notably, the company’s cloud business revenue soared to EUR3.70 billion from EUR3.08 billion, while software-licenses revenue experienced a slight decline to EUR841 million from EUR907 million.

Despite the positive results, SAP’s operating profit slipped to EUR2.51 billion from EUR2.56 billion, with the operating margin falling to 29.6% from 31.7%.

However, the figures were still better than what analysts had anticipated. They had projected total revenue of EUR8.32 billion, cloud revenue of EUR3.72 billion, operating profit of EUR2.47 billion, and an operating margin of 29.9%, according to a company-consensus on a non-IFRS basis.

SAP also made some adjustments to its 2025 targets in light of recent accounting changes and the anticipated benefits from the upcoming restructuring program.

The company’s strong Q4 performance and revised targets have created an optimistic outlook for its future growth and success in the software industry.

SAP Announces 2024 and 2025 Financial Targets

SAP, the multinational software corporation, has shared its financial targets for the years 2024 and 2025. The company predicts a non-IFRS operating profit, at constant currencies, ranging between EUR7.6 billion and EUR7.9 billion for 2024. Furthermore, SAP anticipates cloud revenue, at constant currencies, to fall within the range of EUR17 billion and EUR17.3 billion. Additionally, free cash flow estimates for 2024 hover around EUR3.5 billion.

In an effort to prioritize artificial intelligence, SAP plans to implement a restructuring program throughout the year, affecting approximately 8,000 jobs. The associated costs for this program are currently estimated at about EUR2 billion, with the majority predicted to be recognized in the first half of the year. However, apart from restructuring expenses, the overall impact on cost reduction is expected to be minimal in 2024.

SAP has revised its targets for 2025 to incorporate its fourth-quarter performance, the updated non-IFRS definition of profit measures, and the projected benefits resulting from the restructuring program. The company now expects a non-IFRS operating profit of approximately EUR10 billion for 2025, including share-based compensation expenses of approximately EUR2 billion. This is in contrast to the previous estimate of about EUR11.5 billion, excluding share-based compensation expenses. Moreover, free cash flow for 2025 is projected to be around EUR8 billion, compared to the previous estimate of approximately EUR7.5 billion.

These financial targets represent SAP’s strategic vision for the forthcoming years. With a renewed focus on artificial intelligence and a comprehensive restructuring program, the company aims to enhance its operational efficiency and drive sustainable growth.