SAP’s quarterly revenue beats estimates

SAP reported second-quarter revenue growth of 13% on Thursday, beating estimates on a boost from its cloud business, although the German business software group trimmed its profit outlook for the year due to the war in Ukraine.

SAP, which makes software for managing business processes, has been moving to subscription-based cloud services from software licences with up-front fees.

“Our transition to the cloud is ahead of schedule and we have exceeded topline expectations, with cloud revenue becoming SAP’s largest revenue stream,” Chief Executive Officer Christian Klein said in a statement.

The company’s cloud revenue climbed 34% to 3.06 billion euros ($3.12 billion) in the quarter. The current cloud backlog, which measures incoming business, was up 34% at 10.40 billion euros.

However, the company lowered its 2022 adjusted profit outlook to between 7.6 billion euros and 7.9 billion euros, from a range of 7.8 billion euros to 8.25 billion euros.

SAP cited an impact of 350 million euros at constant currencies on adjusted profit from the war in Ukraine and a potential decline of software licenses revenue.

The company’s exit from Russia and Belarus due to the war in Ukraine led to about 120 million euros in severance payments to employees and impairments of assets.

“The exit is still ongoing. We have notified our employees and they will leave the company over the course of 2022,” Klein said on a call with journalists.

“There’s also a number of employees who might work for us from other locations, but by the end of the year we will have completed the exit and I don’t expect a higher number than 350 million euros.”

Total quarterly revenue rose to 7.52 billion euros at constant currency from 7.08 billion euros. Analysts had expected 7.32 billion euros, a Refinitiv poll showed.

Adjusted earnings per share were 28 cents, below estimates of 44 cents, mainly due to lower contribution from investments in venture capital firm Sapphire Ventures.

Contribution from Sapphire Ventures was down by about 1 billion euros from last year. Reuters