(Bloomberg) -- SAP SE shares rose the most since January after the German software company reported a surge in cloud revenue growth, helped by corporate customers’ demand for services to run artificial intelligence applications.
Adjusted cloud revenue rose 25 per cent at constant currencies in the second quarter from a year earlier to €4.15 billion (US$4.52 billion), the Walldorf-based company said in a statement late Monday. That compares with the average estimate of €4.16 billion from analysts surveyed by Bloomberg.
SAP has promoted its cloud business by bundling it with AI tools to incentivize customers to make the shift, moving users to the more lucrative subscription model and away from on-premise licenses. Its current cloud backlog, an indication of future revenue, grew by 28 per cent to €14.8 billion last quarter.
SAP shares jumped 6.9 per cent to €196.20 at 12:19 p.m. in Frankfurt trading after earlier gaining as much as 7.3 per cent, the biggest intraday increase since January. The stock has increased about 40 per cent this year.
“Our cloud momentum is continuously strong, backed by very strong results in business AI,” Chief Executive Officer Christian Klein said in an interview on Bloomberg Television. SAP’s business AI products influenced “every single deal in Q2.”
SAP is standing out from peers including Salesforce Inc. and Workday Inc., which had given disappointing outlooks this year as the AI boom has primarily helped hardware and chip firms. Klein said the company’s focus on more in-depth business transformation was helping it win market share.
The company reiterated its 2024 outlook and slightly raised its 2025 profit forecast, which Klein attributed to an internal rollout of AI that was making the business more efficient. SAP now expects operating profit of about €10.2 billion, compared to €10 billion previously.
SAP expanded its restructuring plan and said the program will affect 9,000 to 10,000 positions, up from the 8,000 jobs it had previously announced. SAP said restructuring costs, which are focused on adding new skillsets rather than reducing total headcount, in the first half were €2.9 billion and overall expenses related to the program will be about €3 billion. It previously estimated they would be around €2 billion.
JPMorgan analysts including Toby Ogg said that despite problems in the broader software sector, SAP was showing strong signs growth. The maintained free cash flow targets for 2025, taking into account a costly restructuring program, reflect “robust financial management,” he added.
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