Group presents figures: SAP creates turnaround towards cloud business

Status: 01/14/2022 09:37 a.m

Germany’s largest software group SAP made significantly more sales with cloud services than expected last year – at the expense of the profit margin, which could not keep up with the pace.

The Walldorf-based software provider SAP exceeded the company goals it had set itself last year and managed the turn towards the cloud business and away from the sale of software licenses. Revenues from cloud services rose by a sixth to 9.42 billion euros. In the important fourth quarter, the plus even amounted to 28 percent, while total revenues increased by only six percent.

However, profits could not keep up with the strong growth. The operating result shrank by one percent to 8.23 ​​billion euros. The bottom line was a profit of 5.38 billion euros, two percent more than in the previous year. The management around CEO Christian Klein had already warned against expectations that were too high, because the focus is currently on growth opportunities and the group has to spend a lot of money on it.

Growth in the cloud business costs money

In fact, accelerating cloud businesses requires investments in technology, products, and advertising. In addition, the cloud products are initially not as profitable as expensive software packages in a one-off license sale. However, they should gradually pay off over the term and higher customer loyalty, because the cloud software is either paid for as a subscription or through usage fees. The shareholders reacted cautiously to the figures. The SAP price on the Frankfurt Stock Exchange increased by just over one percent in the morning.

A look at the profit prospects this year also initially caused disappointment. Here, SAP is aiming for a largely stable operating result, which could also fall by up to five percent. Analysts had expected more. However, revenue should continue to grow in double digits, especially in the cloud business. CEO Klein expects sales to increase by 23 to 26 percent – faster growth than last year. In contrast, product sales are only expected to grow by four to six percent.

Away from the traditional business

“More and more companies are choosing SAP to reposition themselves, build stable supply chains and develop into sustainable companies on the way to the cloud,” said CEO Klein, who launched the all-round “Rise with SAP” offer has brought to give customers a better hand when moving to the cloud.

Just over a year ago, Klein was still busy presenting his new board of directors around Marketing Director Julia White and explaining his cloud strategy, with which he will sooner or later say goodbye to the traditional software license business, which has been ruined in the Corona crisis want. Just like its US rivals Salesforce, Workday or Oracle, SAP is therefore focusing on the sale of more flexible web subscriptions, which are usually paid for regularly and not once, which makes sales more predictable.

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