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SAP's Q2 Earnings & Revenues Increase Y/Y on Cloud Momentum
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SAP SE (SAP - Free Report) reported second-quarter 2024 non-IFRS earnings of €1.10 ($1.18) per share, climbing 59% from the year-ago quarter’s levels. The Zacks Consensus Estimate was pegged at $1.01.
Powered by resilient performance in the cloud business, SAP reported total revenues on a non-IFRS basis of €8.288 billion ($8,921.3 million), which rose 10% year over year both at nominal and constant currencies (cc) basis. The Zacks Consensus Estimate was pegged at $8,864.7 million.
SAP’s transformation program remains a core focus area aimed at enhancing operational scalability and embracing technological advancements. In 2024, SAP intensified its restructuring efforts, expecting total expenses of roughly €3 billion. This initiative is crucial for aligning SAP’s workforce and resources with long-term business strategies.
Additionally, it plans to invest substantially in Business AI capabilities, leveraging AI-driven insights to enhance customer value and operational efficiency.
In the past year, shares of SAP have gained 51.4% compared with sub-industry’s growth of 24.2%.
Image Source: Zacks Investment Research
Cloud Results
Current cloud backlog — a key indicator of go-to-market success in cloud business — soared 28% (both at nominal and cc basis) to €14.8 billion.
On a non-IFRS basis, the Cloud and software segment (86.6% of total revenues) registered revenues of €7.175 billion, up 10% year over year (both at nominal and cc basis).
Cloud revenues were €4.15 billion, up 25% year over year on a non-IFRS basis (both at nominal and cc basis). The uptick resulted from notable 33% growth in Cloud ERP Suite revenue, highlighting the effectiveness of SAP’s Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS) solutions. SAP’s cloud business strength was prominent across India, Japan, South Korea, Germany, Brazil and Canada. It remained strong in the United States, Saudi Arabia and China.
Software licenses and support revenues totaled €3.021 billion, which decreased 5% (both at nominal and cc basis) year over year. Non-IFRS software license revenues of €0.2 billion declined 28% (down 27% at cc) year over year.
Services business (13.4% of total revenues) posted revenues of €1.11 billion, up 6% year over year (both at nominal and cc basis).
On a non-IFRS basis, cloud revenues related to SaaS and PaaS increased 28% at cc to €4.018 billion. Cloud revenues related to Infrastructure-as-a-Service declined 27% at cc to €135 million.
Rise with SAP solution was adopted by clients, including Alpargatas, Auckland Council, Blue Diamond Growers, Border States, Copenhagen Airports, ExxonMobil, Navantia, PANDORA, Porsche Informatik, Powerlink Queensland, Prairie Farms Dairy, ProRail, Prysmian, Shiseido Company, Tokio Marine & Nichido Fire Insurance, VistaPrint, Warsaw City Hall and Xerox.
In the reported quarter, BMI Group Holdings, Co-op, Fiagril, Pure Storage, UBE Corporation, and Wegmans went live on SAP S/4HANA Cloud.
Major global brands across various industries, including Accenture, Ambipar, Arca Continental, BASF, Buderus Guss, Carl Zeiss, DACHSER, Endress+Hauser, iHerb, Lenovo, Minor Hotels, New Look, Parle Biscuits, Refresco, U.S. Sugar, Veolia Group and Zoomlion, adopted SAP’s solutions.
GROW with SAP was implemented by Consolidated Hospitality Supplies, flatexDEGIRO, Fortera Corporation, La Trobe University, Stern-Wywiol Gruppe and Trade Capital Corporation to power their respective cloud ERP with innovations.
In April 2024, SAP announced significant advancements in AI for supply chain solutions, aiming to redefine productivity and efficiency in manufacturing sectors.
In May 2023, SAP announced a repurchase program with an aggregate volume of up to €5 billion with expiry until Dec 31, 2025. As of Jun 30, 2024, SAP repurchased 12,895,525 shares at an average price of €145.2, resulting in payouts of €1.87 billion under the program.
Margin Details
Non-IFRS gross profit of €6.03 billion increased 11% from the year-ago quarter’s figure.
Non-IFRS Cloud gross profit increased 28% year over year to €3.04 billion (up 29% at cc) Non-IFRS Cloud gross margin was 73.3%.
Non-IFRS operating profit of €1.94 billion increased 33% on a year-over-year basis (up 35% at cc). The expansion was driven by healthy revenue growth along with the smooth execution of the 2024 transformation program.
Cash Flow
In the quarter under review, the company generated operating cash of €1.54 billion compared with €848 billion in the prior-year quarter.
In the second quarter, free cash flow was €1.29 billion compared with €604 billion in the prior-year quarter.
Outlook
For 2024, management anticipates cloud revenues in the range of €17-€17.3 billion, suggesting an increase of 24-27% at cc on a year-over-year basis.
Cloud and software revenues for the year are now expected to be between €29 billion and €29.5 billion, suggesting 8-10% growth at cc on a year-over-year basis.
Management projects 2024 non-IFRS operating profit in the range of €7.6-€7.9 billion, indicating a rise of 17-21% at cc on a year-over-year basis.
Free cash flow is estimated to be nearly €3.5 billion.
Also, the company reaffirmed its guidance for 2025. Non-IFRS cloud gross profit is expected to be nearly €16.2 billion.
Non-IFRS operating profit is anticipated to be roughly €10.2 billion, revised up from roughly €10 billion guided earlier.
Free cash flow is forecasted to be €8.0 billion. The company continues to expect cloud revenues of more than €21.5 billion and total revenues of more than €37.5 billion for 2025.
Zacks Rank
SAP currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Arista Networks, Inc. (ANET - Free Report) , sporting a Zacks Rank #1 (Strong Buy) at present, has a long-term earnings growth expectation of 16.1% and delivered an earnings surprise of 15.39%, on average, in the trailing four quarters. In the last reported quarter, it delivered an earnings surprise of 14.37%. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. It is increasingly gaining market traction in 200 and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations
Motorola Solutions Inc. (MSI - Free Report) provides services and solutions to government segments and public safety programs, along with large enterprises and wireless infrastructure services. Motorola carries a Zacks Rank #2 (Buy) at present.
It delivered a trailing four-quarter average earnings surprise of 7.54% and has a long-term growth expectation of 9.47%. In the last reported quarter, Motorola delivered an earnings surprise of 11.51%.
Silicon Motion Technology Corporation (SIMO - Free Report) , sporting a Zacks Rank #1 at present, delivered a trailing four-quarter average earnings surprise of 4.72%.
SIMO is a leading developer of microcontroller ICs for NAND flash storage devices. The semiconductor company also designs, develops and markets high-performance, low-power semiconductor solutions for original equipment manufacturers and other customers.
Note: €1 = $1.07631 (period average from Apr 1, 2024, to Jun 30, 2024)
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SAP's Q2 Earnings & Revenues Increase Y/Y on Cloud Momentum
SAP SE (SAP - Free Report) reported second-quarter 2024 non-IFRS earnings of €1.10 ($1.18) per share, climbing 59% from the year-ago quarter’s levels. The Zacks Consensus Estimate was pegged at $1.01.
Powered by resilient performance in the cloud business, SAP reported total revenues on a non-IFRS basis of €8.288 billion ($8,921.3 million), which rose 10% year over year both at nominal and constant currencies (cc) basis. The Zacks Consensus Estimate was pegged at $8,864.7 million.
SAP’s transformation program remains a core focus area aimed at enhancing operational scalability and embracing technological advancements. In 2024, SAP intensified its restructuring efforts, expecting total expenses of roughly €3 billion. This initiative is crucial for aligning SAP’s workforce and resources with long-term business strategies.
Additionally, it plans to invest substantially in Business AI capabilities, leveraging AI-driven insights to enhance customer value and operational efficiency.
In the past year, shares of SAP have gained 51.4% compared with sub-industry’s growth of 24.2%.
Image Source: Zacks Investment Research
Cloud Results
Current cloud backlog — a key indicator of go-to-market success in cloud business — soared 28% (both at nominal and cc basis) to €14.8 billion.
On a non-IFRS basis, the Cloud and software segment (86.6% of total revenues) registered revenues of €7.175 billion, up 10% year over year (both at nominal and cc basis).
Cloud revenues were €4.15 billion, up 25% year over year on a non-IFRS basis (both at nominal and cc basis). The uptick resulted from notable 33% growth in Cloud ERP Suite revenue, highlighting the effectiveness of SAP’s Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS) solutions. SAP’s cloud business strength was prominent across India, Japan, South Korea, Germany, Brazil and Canada. It remained strong in the United States, Saudi Arabia and China.
Software licenses and support revenues totaled €3.021 billion, which decreased 5% (both at nominal and cc basis) year over year. Non-IFRS software license revenues of €0.2 billion declined 28% (down 27% at cc) year over year.
Services business (13.4% of total revenues) posted revenues of €1.11 billion, up 6% year over year (both at nominal and cc basis).
On a non-IFRS basis, cloud revenues related to SaaS and PaaS increased 28% at cc to €4.018 billion. Cloud revenues related to Infrastructure-as-a-Service declined 27% at cc to €135 million.
SAP SE Price, Consensus and EPS Surprise
SAP SE price-consensus-eps-surprise-chart | SAP SE Quote
Expanding Clientele Bodes Well
Rise with SAP solution was adopted by clients, including Alpargatas, Auckland Council, Blue Diamond Growers, Border States, Copenhagen Airports, ExxonMobil, Navantia, PANDORA, Porsche Informatik, Powerlink Queensland, Prairie Farms Dairy, ProRail, Prysmian, Shiseido Company, Tokio Marine & Nichido Fire Insurance, VistaPrint, Warsaw City Hall and Xerox.
In the reported quarter, BMI Group Holdings, Co-op, Fiagril, Pure Storage, UBE Corporation, and Wegmans went live on SAP S/4HANA Cloud.
Major global brands across various industries, including Accenture, Ambipar, Arca Continental, BASF, Buderus Guss, Carl Zeiss, DACHSER, Endress+Hauser, iHerb, Lenovo, Minor Hotels, New Look, Parle Biscuits, Refresco, U.S. Sugar, Veolia Group and Zoomlion, adopted SAP’s solutions.
GROW with SAP was implemented by Consolidated Hospitality Supplies, flatexDEGIRO, Fortera Corporation, La Trobe University, Stern-Wywiol Gruppe and Trade Capital Corporation to power their respective cloud ERP with innovations.
In April 2024, SAP announced significant advancements in AI for supply chain solutions, aiming to redefine productivity and efficiency in manufacturing sectors.
In May 2023, SAP announced a repurchase program with an aggregate volume of up to €5 billion with expiry until Dec 31, 2025. As of Jun 30, 2024, SAP repurchased 12,895,525 shares at an average price of €145.2, resulting in payouts of €1.87 billion under the program.
Margin Details
Non-IFRS gross profit of €6.03 billion increased 11% from the year-ago quarter’s figure.
Non-IFRS Cloud gross profit increased 28% year over year to €3.04 billion (up 29% at cc) Non-IFRS Cloud gross margin was 73.3%.
Non-IFRS operating profit of €1.94 billion increased 33% on a year-over-year basis (up 35% at cc). The expansion was driven by healthy revenue growth along with the smooth execution of the 2024 transformation program.
Cash Flow
In the quarter under review, the company generated operating cash of €1.54 billion compared with €848 billion in the prior-year quarter.
In the second quarter, free cash flow was €1.29 billion compared with €604 billion in the prior-year quarter.
Outlook
For 2024, management anticipates cloud revenues in the range of €17-€17.3 billion, suggesting an increase of 24-27% at cc on a year-over-year basis.
Cloud and software revenues for the year are now expected to be between €29 billion and €29.5 billion, suggesting 8-10% growth at cc on a year-over-year basis.
Management projects 2024 non-IFRS operating profit in the range of €7.6-€7.9 billion, indicating a rise of 17-21% at cc on a year-over-year basis.
Free cash flow is estimated to be nearly €3.5 billion.
Also, the company reaffirmed its guidance for 2025. Non-IFRS cloud gross profit is expected to be nearly €16.2 billion.
Non-IFRS operating profit is anticipated to be roughly €10.2 billion, revised up from roughly €10 billion guided earlier.
Free cash flow is forecasted to be €8.0 billion. The company continues to expect cloud revenues of more than €21.5 billion and total revenues of more than €37.5 billion for 2025.
Zacks Rank
SAP currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Arista Networks, Inc. (ANET - Free Report) , sporting a Zacks Rank #1 (Strong Buy) at present, has a long-term earnings growth expectation of 16.1% and delivered an earnings surprise of 15.39%, on average, in the trailing four quarters. In the last reported quarter, it delivered an earnings surprise of 14.37%. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. It is increasingly gaining market traction in 200 and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations
Motorola Solutions Inc. (MSI - Free Report) provides services and solutions to government segments and public safety programs, along with large enterprises and wireless infrastructure services. Motorola carries a Zacks Rank #2 (Buy) at present.
It delivered a trailing four-quarter average earnings surprise of 7.54% and has a long-term growth expectation of 9.47%. In the last reported quarter, Motorola delivered an earnings surprise of 11.51%.
Silicon Motion Technology Corporation (SIMO - Free Report) , sporting a Zacks Rank #1 at present, delivered a trailing four-quarter average earnings surprise of 4.72%.
SIMO is a leading developer of microcontroller ICs for NAND flash storage devices. The semiconductor company also designs, develops and markets high-performance, low-power semiconductor solutions for original equipment manufacturers and other customers.
Note: €1 = $1.07631 (period average from Apr 1, 2024, to Jun 30, 2024)