SAP Sees Brighter Future Ahead with Cloud Computing and AI
Optimism Abounds
Europe’s largest software maker, SAP, has expressed increased confidence in its financial performance this year, driven by rapid growth in cloud computing and artificial intelligence. The company anticipates operating profit in 2025 to fall between €10.3 billion and €10.6 billion, surpassing its previous estimate of €10.2 billion.
Cloud Computing Takes Center Stage
SAP’s strong position in data and business AI has given the company an added boost, with CEO Christian Klein stating that they expect to accelerate revenue growth through 2027. The company’s fourth-quarter cloud order entry saw half of its deals incorporating AI, a significant increase from the previous quarter.
AI-Powered Innovation
SAP’s AI offering, which includes a virtual copilot named Joule, has been instrumental in helping users manage business tasks such as overseeing purchase orders. The company has seen remarkable results, with 20,000 SAP developers already utilizing Joule to produce code 20% faster.
Financial Performance
The company’s shares initially surged 3.1% before leveling off, as investors responded positively to the news. SAP now expects cloud revenues to reach €21.6 billion to €21.9 billion for the year, with fourth-quarter cloud revenue growing 27% to €4.71 billion, exceeding analyst expectations.
Quarterly Results
The company’s cloud and software revenue grew 11% to €8.27 billion, beating analyst consensus. Quarterly operating income, adjusted for special items, gained 24% to €2.44 billion, surpassing expectations.
Restructuring Ahead
As SAP prepares for the era of AI, the company has announced plans to review up to 10,000 jobs out of its 100,000 total headcount, with projected restructuring costs of around €3 billion.
Market Reaction
On Monday, SAP shares had dropped alongside other European technology stocks, following concerns over the profitability of AI and related investments. However, the company’s optimistic outlook has helped to restore investor confidence.
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