SAP has revised its financial outlook for 2025, driven by robust growth in its cloud computing business. The German software company now expects operating profit on a constant currency basis to range between €10.3bn and €10.6bn, up from its previous target of €10.2bn. Cloud revenue for 2025 is projected to increase to between €21.6bn and €21.9bn, slightly higher than earlier estimates.
The company had previously aimed for total revenue exceeding €37.5bn and cloud revenue of more than €21.5bn by 2025. The new forecast reflects SAP’s expectations of continued growth in its cloud operations. Despite strong financial performance, SAP shares faced pressure earlier this week, declining alongside other European technology stocks. Investor concerns about the profitability of artificial intelligence (AI) investments contributed to market volatility, driven in part by the rising influence of a Chinese discount AI model.
In Q4 2024, which ended on 31 December, SAP’s cloud revenue rose by 27%, reaching €4.71bn, surpassing analysts’ expectations of €4.67bn. Cloud and software revenue for the quarter grew by 11%, adjusted for currency effects, to €8.27bn, exceeding consensus estimates of €8bn. For the full year 2024, cloud revenue climbed 25% to €17.14bn, while total revenue grew by 10% to €34.18bn. SAP’s cloud ERP suite played a significant role in this performance, with revenue from the suite increasing by 34% for the year.
Restructuring costs and workforce adjustments
SAP is undergoing a company-wide restructuring programme. The company has indicated that up to 10,000 jobs out of its 100,000-strong workforce are under review. The restructuring is expected to incur costs of approximately €3.2bn, with payouts of €1.7bn in the fourth quarter and €2.5bn for the full year 2024. The programme is anticipated to conclude by early 2025, with an additional €700m expected to be paid out in that year.
SAP’s total cloud backlog reached €63.3bn in 2024, marking a 43% increase year-on-year, with 40% growth at constant currencies. The current cloud backlog stood at €18.1bn, up 32%. Cloud and software revenue rose by 11% to €29.83bn for the year, while total revenue increased by 10%. Subscription-based services accounted for 83% of total revenue in 2024, reflecting a shift towards predictable income streams.
“Q4 was a strong finish to the year, with half of our cloud order entry including AI,” said SAP CEO Christian Klein. “Looking at the full year, we exceeded our cloud goals, accelerating cloud revenue and current cloud backlog growth against a much larger base. Total cloud backlog now stands at €63bn, up 40%. Revenue growth has returned to double-digits. Looking ahead, our strong position in data and Business AI gives us additional confidence that we will accelerate revenue growth through 2027.”
SAP’s updated 2025 outlook projects cloud and software revenue to grow between 11% and 13%, reaching €33.1bn to €33.6bn. Free cash flow is expected to rise significantly, supported by operational improvements and reporting changes.
Read more: SAP’s Q2 2024 total revenue increases by 10% to €8.3bn
