SAP SE (SAP) Q3 2024 Earnings Call Highlights: Cloud Revenue Soars Amidst Macroeconomic Challenges

GuruFocus News
4 min read

In This Article:

  • Current Cloud Backlog: Increased by 29% to EUR15.4 billion.

  • Cloud Revenue Growth: Accelerated to 27%, reaching EUR4.4 billion.

  • Cloud ERP Suite Growth: Increased by 36% to EUR3.6 billion.

  • Operating Profit: Increased by 28% to EUR2.2 billion.

  • Operating Margin: Achieved 26.5%.

  • Share of Predictable Revenue: Now at 84%.

  • Total Revenue: EUR8.5 billion, up 10% year-over-year.

  • Non-IFRS Cloud Gross Profit: Increased by 28%.

  • Cloud Gross Margin: Improved by 0.6 percentage points to 73.7%.

  • Non-IFRS Earnings Per Share: Increased by 6% to EUR1.23.

  • Free Cash Flow: Increased by 44% to EUR1.2 billion for Q3.

  • 2024 Operating Profit Outlook: Raised to EUR7.8 billion to EUR8 billion.

Release Date: October 21, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • SAP SE (NYSE:SAP) reported accelerated total and cloud revenue growth, with cloud revenue increasing by 27% to EUR 4.4 billion.

  • The Cloud ERP Suite was a significant driver of growth, with a 36% increase, marking the 11th consecutive quarter of growth in the 30s.

  • Operating profit increased by 28% to EUR 2.2 billion, with an excellent operating margin of 26.5%.

  • SAP SE (NYSE:SAP) successfully completed the acquisition of WalkMe, enhancing its business transformation portfolio.

  • The company raised its 2024 outlook, expecting an operating profit of EUR 7.8 billion to EUR 8 billion, and confirmed it is on track for its 2025 financial ambitions.

Negative Points

  • The macroeconomic environment remains challenging, with potential impacts on future performance.

  • There is a risk of disruption due to ongoing restructuring and management changes, including a 10% workforce reduction.

  • Transactional business revenue has declined mid-single digits, reflecting macroeconomic pressures.

  • The integration of WalkMe is expected to be dilutive in the short term, with EUR 14 million in losses reported.

  • The company anticipates a gradual decline in software support revenue as more customers transition to cloud solutions.

Q & A Highlights

Q: Can you discuss the strong contribution of large deals this quarter and the pipeline for Q4? Also, how are macroeconomic conditions affecting your business? A: Dominik Asam, CFO: We observed strong momentum from large enterprises, which gives us stability. The demand environment remains solid despite macroeconomic challenges. Christian Klein, CEO: We see no slowdown in transformation projects, especially in industries like chemicals and automotive. Our AI use cases are adding value, and we expect continued growth.

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