SAP (SAP) Q2 2024 earnings summary

Executive summary

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

• Total revenue increased 10% year-over-year to €8.3B, supported by robust cloud and software performance and services revenue up 6%.

• SAP accelerated innovation in cloud and AI, expanding partnerships, embedding AI across its portfolio, and publishing over 60 GenAI use cases.

• Transformation program expanded, targeting future growth areas, optimizing workforce, and incurring €0.6B in restructuring expenses in Q2.

• Major customer wins and strategic partnerships, including the announced acquisition of WalkMe Ltd. for ~$1.5B.

Financial highlights

• Cloud revenue rose 25% to €4.2B, with Cloud ERP Suite up 33% and cloud & software revenue up 10% to €7.18B.

• Non-IFRS operating profit increased 33% to €1.94B; IFRS operating profit declined 11% to €1.22B due to restructuring.

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

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

• Cloud gross margin (non-IFRS) improved to 73.3%; total gross margin (non-IFRS) reached 72.7%.

Outlook and guidance

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

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

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