Transformation Program Shows Effect in SAP Quarterly Figures
With an increase of nine percent to 8.47 billion EUR, SAP's revenues developed better than originally forecast for the third quarter. The current cloud backlog increased by 25 percent to 15.38 billion EUR, with the acquisition of WalkMe contributing around one percentage point to this growth rate. Cloud revenue also increased by 25 percent and now stands at 4.35 billion EUR. According to SAP, this is based on revenue for the Cloud ERP Suite, which rose by 34 percent to 3.64 billion EUR. In contrast, software license revenue fell by 15 percent and now stands at 0.28 billion EUR. According to SAP, the growth in operating profit—up 29 percent to 2.21 billion EUR—can primarily be traced back to strong revenue growth and the disciplined implementation of the 2024 transformation program.
Transformation program 2024
In 2024, SAP has placed an even stronger focus on key strategic growth areas, particularly AI for business. It is redesigning its operational structure to leverage organizational synergies and achieve efficiency gains through AI and prepare the company for highly scalable future revenue growth. To achieve this, SAP is implementing a company-wide restructuring program, as announced in January, which is expected to be completed by early 2025. The restructuring is designed to ensure that SAP's skills and resources continue to meet future business needs. The restructuring is expected to affect between 9,000 and 10,000 positions, most of which will be affected by voluntary programs and internal retraining measures. Due to reinvestments in strategic growth areas and the acquisition of WalkMe, SAP now expects the number of employees at the end of 2024 to be slightly higher than at the end of 2023. Overall, the company anticipates restructuring expenses, and the costs associated with the program of around three billion EUR for the whole of 2024.
Confident SAP management
SAP management is very satisfied and confident in view of the latest figures. According to CEO Christian Klein, growth in cloud revenues has developed exceptionally well, particularly in the Cloud ERP Suite, and innovations such as the SAP Knowledge Graph solution are also making decisive progress in enterprise AI: "A significant proportion of our cloud contracts in the third quarter included AI application scenarios." According to CFO Dominik Asam, the 2024 transformation program has already resulted in initial efficiency gains: "This allowed us to deliver a strong operating profit and free cash flow, while retaining our topline momentum." The company now wants to focus on building on this success in the fourth quarter in order to achieve its targets for 2025 despite an extremely volatile environment.
"Cloud revenue growth developed remarkably well in the quarter, especially for our Cloud ERP Suite."
Christian Klein, CEO SAP
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