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Wednesday 13 October 2021

SAP: cloud driven Q321 prelims provide welcome contrast to last year

SAP logoPrelim results indicate SAP had an above expectations Q321 due to accelerating cloud demand, enabling it to raise its full year outlook. The latest update provides a stark contrast to this time last year when disappointing performance reflected deeper than expected COVID  impact, slower recovery, lowered FY outlook and cloud ambitions, plus a shock 22% crash in the share price. 

Lacklustre cloud growth was an issue in the year ago quarter but SAP appears to have turned things around and expects to report a 20% increase in cloud revenue to €2.39bn when it releases full Q321 results. With total revenue expectations of €6.84bn, a 5% increase, that would put cloud revenue at 35% compared to c.30% in Q320. It seems that the RISE for SAP subscription offering is driving cloud demand, including the cloud version of S/4HANA although its 46% growth only took it to €276m in terms of revenue. Unsurprisingly, overall licence revenue declined, falling back 8% to €0.66bn. 

Operating profit took a 15% tumble to €1.25bn due in part to investment to launch the dedicated financial services industry unit SAP Fioneer which is jointly owned with Dediq

Confident that the COVID crisis will continue to recede and that RISE with continue to rise, SAP increased its full year outlook, including cloud revenue guidance of €9.4bn-€9.6bn, a 16%-18% uplift on previous guidance. It is not the only cloud confident supplier. Salesforce recently edged up its revenue forecast for the current fiscal year and provided an outlook for next year that exceeded analysts’ estimates. Revenue for the year ending in January could be as high as $26.35bn, against previous estimates of up to $26.3bn. For the coming full year Salesforce expects revenue in the $31.65bn-$31.80bn range. 

Posted by: Angela Eager at 09:40

Tags: cloud   software   tradingupdate  

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