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SAP’s revenue and outlook sends shares higher

Software maker SAP remains on track to meet full-year guidance after its cloud business drove faster than expected quarterly revenue growth, it said on Monday, sending its shares up 4%.

The company’s cloud business has been growing at a rapid clip, rising 38% in the third quarter to 3.29 billion euros ($3.25 billion).

Since becoming SAP’s sole CEO in 2020, Christian Klein has focused on cloud operations, adopting a subscription-based service model that generates predictable revenue over time rather than the lumpy up-front cash flows from software licences.

At that time it envisaged total adjusted revenue of 36 billion euros in 2025, with 22 billion euros of that coming from the cloud business.

“We are looking at our plan right now we are very confident that we are going to over-achieve our 2025 vision,” Klein said on Tuesday.

A strong dollar has helped and the company has also raised rates for clients to pass on some of its rising costs.

SAP rival Oracle said in September that demand for its cloud services was strong, driving segment revenue up 45% to $3.6 billion.

SAP is also discussing one-off bonuses and salary increases for employees to offset inflation, Klein said.

“We are discussing this right now and we are going to communicate this to our employees beginning of next year,” he said.

Total revenue grew 5% in currency-adjusted terms to 7.84 billion euros, SAP said, beating analyst expectations of 7.62 billion euros.

SAP stuck with its full-year operating profit forecast of between 7.6 billion and 7.9 billion euros. That forecast was made in July, when it cut its guidance from between 7.8 billion and 8.25 billion euros, citing charges related to the war in Ukraine.

Reuters reported on Monday that SAP would miss its deadline to exit Russia before the end of the year. Reuters

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