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Wednesday 21 July 2021

Cloud Rising at SAP during Q2; UK investment announced

SAP logoWe’re seeing strong adoption of our cloud portfolio…Our strategy is working”, so said SAP CEO Christian Klein as Q221 results were released, and both yoy and qoq performance back up the statement. Confidence levels are such that the company has raised its cloud revenue target for the year for the second time, with €9.3bn-€9.5bn now in its sights, which would be a 15%-18% yoy increase. 

The current confidence contrasts with the situation last October when SAP reduced FY20 outlook, slimmed down revenue and operating profit and after reviewing its 2023 ambition pushed revised goals out to 2025 (see here), leading to a 22% share crash (see here). Since then the company has gone all in on the cloud, including launching the RISE for SAP offering to accelerate cloud adoption in Q1. It has been to good effect. Cloud revenue for Q2 rose 11% (17% cc) to €2.28bn. S/4HANA revenue increased 33% to €0.26bn, while the S/4HANA cloud backlog rose a reassuring 45% to €1.13bn. On top of that, there were 250 new RISE signups, adding to the 100 of Q1. There were 600 new S/4HANA customers during Q2, a 16% yoy increase, taking the total to 17,000 with 10,100 live. 

Cloud progress was the highlight as overall revenue declined 1% (but +3% cc) to €6.67bn as licence revenue fell 16%, and Services dropped 11% due to a divestment. Operating profit declined 23% to €0.98bn, in part due to Qualtrics compensation expenses and investment in the cloud transition. 

Investment is high on the agenda as SAP also plans to invest €250m into the UK over the next five years. It will fund two new offices in London and Manchester and a new UK Data Cloud Scheduled to go live in 2022, the data cloud will leverage relationships with AWS, Microsoft Azure and Google Cloud and be able to keep sensitive data within the UK. SAP is working with SAP National Security Services which has developed data centres to support the UK Critical National Infrastructure. The new data cloud, designed to appeal to the public as well as the private sector, can be considered a cost of doing business in post-Brexit UK. Oracle expanded its dedicated UK public sector government cloud last October. SAP is also planning to add 250 intern places by the end of 2026 and will scale up its apprenticeship programme too. 

Posted by: Angela Eager at 09:24

Tags: results   publicsector   cloud   investment   software  

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