SAP (SAP) Q2 2024 earnings summary

Executive summary

• Q2 2024 delivered strong cloud growth, with cloud revenue up 25% year-over-year to €4.2 billion and current cloud backlog up 28% to €14.8 billion, driven by 33% growth in Cloud ERP Suite revenue.

• Total revenue increased 10% year-over-year to €8.3 billion, supported by robust cloud and software performance and strong customer adoption of AI-driven solutions.

• Non-IFRS operating profit rose 35% to €1.94 billion, while IFRS operating profit declined 11% to €1.22 billion due to €600 million in restructuring expenses.

• SAP accelerated innovation in cloud and AI, expanding partnerships and embedding AI across its portfolio, with over 60 GenAI use cases published and more than 100 scenarios targeted by year-end.

• The transformation program expanded, targeting future growth areas, optimizing workforce skills and locations, and affecting 9,000–10,000 positions.

Financial highlights

• Cloud gross profit grew 29% to €3.03 billion, with cloud gross margin up to 73.3% (Non-IFRS), and total gross margin (Non-IFRS) at 72.7%.

• Cloud & software revenue rose 10% to €7.18 billion; SaaS/PaaS cloud revenue up 28% to €4.02 billion, while IaaS revenue declined 27% to €135 million.

• Free cash flow in Q2 increased 114% to €1.3 billion, and for H1 2024 reached €3.8 billion, up 48% year-over-year.

• Share of more predictable revenue increased by 2 percentage points to 84%.

• Non-IFRS EPS up 59% to €1.10; IFRS EPS up 22% to €0.76.

Outlook and guidance

• 2024 outlook reiterated: cloud revenue €17.0–17.3 billion (+24–27%), cloud & software revenue €29.0–29.5 billion (+8–10%), non-IFRS operating profit €7.6–7.9 billion (+17–21%), free cash flow ~€3.5 billion.

• 2025 ambition raised: non-IFRS operating profit ~€10.2 billion, cloud revenue >€21.5 billion, total revenue >€37.5 billion, free cash flow ~€8.0 billion.

• Transformation program expected to affect 9,000–10,000 positions, with total restructuring expenses of €3 billion and additional run rate savings of €200 million.

• Effective tax rate (Non-IFRS) expected at ~32% for 2024.

• Most restructuring payouts expected in H2 2024 and some into 2025.