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SAP Focuses on Cloud Operations to Drive Top-Line Growth
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SAP SE (SAP - Free Report) has been putting in extensive efforts to grow its cloud operations and boost overall performance. It is one of the largest independent software vendors in the world. SAP is also the leading provider of enterprise resource planning (ERP) software.
Rise With SAP Driving Cloud Efforts
The company’s efforts have received a major push with the launch of the Rise with SAP solution.
Rise with SAP helps companies to transform their business processes and operations to become more nimble, digital and intelligent. It includes a set of pre-configured, industry-specific templates and best practices for implementing SAP software. Additionally, it has a comprehensive set of services and support to help companies successfully adopt and leverage the technology.
In the last reported quarter, the solution was adopted by clients including ARAG, Bacardi-Martini, Bayer, DFS Deutsche Flugsicherung, Empresas Polar, Foodstuffs South Island, GOL, McBride, Municipality of Utrecht and Sochor.
This solution continues to gain significant traction and will aid the company to drive its market share in the cloud ERP solutions space.
Rise with SAP will aid the company to boost the uptake of its cloud-based solutions, such as SAP S/4HANA, by providing customers with more options for implementation and support from certified partners.
Driven by strength in cloud business, SAP reported total revenues, on a non-IFRS basis, of €7.554 billion ($8.182 billion), increasing 5% year over year (up 8% at constant currency or cc) for second-quarter 2023. The Zacks Consensus Estimate was pegged at $8.376 billion.
Cloud revenues were €3.316 billion, up 19% year over year on a non-IFRS basis (up 22% at cc). SAP’s cloud business gained momentum across Germany, Brazil and India. It remained strong in the United States, the Netherlands, France, China and Chile.
The company’s ongoing restructuring plan is expected to better align its operating models and go-to-market approach with its accelerated cloud transformation. As part of increasing focus on cloud operations, SAP also divested its stake in Qualtrics to accelerate cloud transformation.
SAP expects to achieve €21.5 billion in cloud revenues by 2025.
A Look at Other Catalysts
Momentum in SAP’s business technology platform particularly S/4HANA solutions augurs well. More companies have begun deploying S/4HANA solution partly or entirely in the cloud. SAP S/4HANA cloud revenues soared 74% (up 79% at cc) year over year to €823 million in the last reported quarter. Its current cloud backlog rose 65% (up 70% at cc) year over year.
Frequent product launches like Grow with SAP and SAP Datasphere as well as strategic acquisitions and collaborations bode well.
Moreover, management remains optimistic about generative AI trend and expects it to positively impact revenues going forward. It recently inked an agreement with Microsoft to team up on generative AI solutions to aid clients addressing the talent gap with new recruitment and development tools. It also invested funds in three companies, Aleph Alpha, Anthropic and Cohere, which are engaged in generative AI. Management plans to roll out new AI solutions across portfolio later in the year.
However, the company’s performance is affected by continued softness in the software license and support business segment coupled with global macroeconomic weakness and geopolitical instability. Also, increasing research & development costs, and stiff competition in the cloud space are concerns.
A Look at Estimates
SAP’s earnings per share (EPS) are expected to increase 29.7% and 21.1% on a year-over-year basis to $5.55 and $6.72 in 2023 and 2024, respectively. Revenues for 2023 and 2024 are projected to rise 5.8% and 8.8% to $34.35 billion and $37.4 billion, respectively.
The Zacks Consensus Estimate for 2023 and 2024 earnings has remained unchanged in the past seven days.
Zacks Rank & Share Price Movement
SAP currently carries a Zacks Rank #3 (Hold).
In the past year, shares of SAP have gained 64.2% compared with Zacks sub-industry’s growth of 35.3%.
The Zacks Consensus Estimate for Badger Meter’s 2023 EPS has increased 5.1% in the past 60 days to $2.86. BMI’s earnings beat estimates in the last four quarters, the average surprise being 6.7%. Shares of BMI have surged 79.9% in the past year.
The Zacks Consensus Estimate for Salesforce’s fiscal 2024 EPS is pegged at $7.51, up 0.9% in the past 60 days. The long-term earnings growth rate is anticipated to be 22.5%.
CRM’s earnings surpassed estimates in the last four quarters, the average beat being 14.2%. Shares of CRM have rallied 46% in the past year.
The Zacks Consensus Estimate for Adobe’s fiscal 2023 EPS has remained unchanged in the past 60 days at $15.70. ADBE’s earnings outshined estimates in the last four quarters, the average surprise being 3.1%. Shares of ADBE have jumped 52.9% in the past year.
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SAP Focuses on Cloud Operations to Drive Top-Line Growth
SAP SE (SAP - Free Report) has been putting in extensive efforts to grow its cloud operations and boost overall performance. It is one of the largest independent software vendors in the world. SAP is also the leading provider of enterprise resource planning (ERP) software.
Rise With SAP Driving Cloud Efforts
The company’s efforts have received a major push with the launch of the Rise with SAP solution.
Rise with SAP helps companies to transform their business processes and operations to become more nimble, digital and intelligent. It includes a set of pre-configured, industry-specific templates and best practices for implementing SAP software. Additionally, it has a comprehensive set of services and support to help companies successfully adopt and leverage the technology.
In the last reported quarter, the solution was adopted by clients including ARAG, Bacardi-Martini, Bayer, DFS Deutsche Flugsicherung, Empresas Polar, Foodstuffs South Island, GOL, McBride, Municipality of Utrecht and Sochor.
This solution continues to gain significant traction and will aid the company to drive its market share in the cloud ERP solutions space.
Rise with SAP will aid the company to boost the uptake of its cloud-based solutions, such as SAP S/4HANA, by providing customers with more options for implementation and support from certified partners.
Driven by strength in cloud business, SAP reported total revenues, on a non-IFRS basis, of €7.554 billion ($8.182 billion), increasing 5% year over year (up 8% at constant currency or cc) for second-quarter 2023. The Zacks Consensus Estimate was pegged at $8.376 billion.
Cloud revenues were €3.316 billion, up 19% year over year on a non-IFRS basis (up 22% at cc). SAP’s cloud business gained momentum across Germany, Brazil and India. It remained strong in the United States, the Netherlands, France, China and Chile.
The company’s ongoing restructuring plan is expected to better align its operating models and go-to-market approach with its accelerated cloud transformation. As part of increasing focus on cloud operations, SAP also divested its stake in Qualtrics to accelerate cloud transformation.
SAP expects to achieve €21.5 billion in cloud revenues by 2025.
A Look at Other Catalysts
Momentum in SAP’s business technology platform particularly S/4HANA solutions augurs well. More companies have begun deploying S/4HANA solution partly or entirely in the cloud. SAP S/4HANA cloud revenues soared 74% (up 79% at cc) year over year to €823 million in the last reported quarter. Its current cloud backlog rose 65% (up 70% at cc) year over year.
Frequent product launches like Grow with SAP and SAP Datasphere as well as strategic acquisitions and collaborations bode well.
Moreover, management remains optimistic about generative AI trend and expects it to positively impact revenues going forward. It recently inked an agreement with Microsoft to team up on generative AI solutions to aid clients addressing the talent gap with new recruitment and development tools. It also invested funds in three companies, Aleph Alpha, Anthropic and Cohere, which are engaged in generative AI. Management plans to roll out new AI solutions across portfolio later in the year.
However, the company’s performance is affected by continued softness in the software license and support business segment coupled with global macroeconomic weakness and geopolitical instability. Also, increasing research & development costs, and stiff competition in the cloud space are concerns.
A Look at Estimates
SAP’s earnings per share (EPS) are expected to increase 29.7% and 21.1% on a year-over-year basis to $5.55 and $6.72 in 2023 and 2024, respectively. Revenues for 2023 and 2024 are projected to rise 5.8% and 8.8% to $34.35 billion and $37.4 billion, respectively.
The Zacks Consensus Estimate for 2023 and 2024 earnings has remained unchanged in the past seven days.
Zacks Rank & Share Price Movement
SAP currently carries a Zacks Rank #3 (Hold).
In the past year, shares of SAP have gained 64.2% compared with Zacks sub-industry’s growth of 35.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks worth consideration in the broader technology space are Badger Meter (BMI - Free Report) , Salesforce (CRM - Free Report) and Adobe (ADBE - Free Report) . Each stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Badger Meter’s 2023 EPS has increased 5.1% in the past 60 days to $2.86. BMI’s earnings beat estimates in the last four quarters, the average surprise being 6.7%. Shares of BMI have surged 79.9% in the past year.
The Zacks Consensus Estimate for Salesforce’s fiscal 2024 EPS is pegged at $7.51, up 0.9% in the past 60 days. The long-term earnings growth rate is anticipated to be 22.5%.
CRM’s earnings surpassed estimates in the last four quarters, the average beat being 14.2%. Shares of CRM have rallied 46% in the past year.
The Zacks Consensus Estimate for Adobe’s fiscal 2023 EPS has remained unchanged in the past 60 days at $15.70. ADBE’s earnings outshined estimates in the last four quarters, the average surprise being 3.1%. Shares of ADBE have jumped 52.9% in the past year.