SAP reported robust Q3 2023 earnings, highlighted by a 23% increase in cloud revenue and a 16% rise in operating profit. The company's cloud backlog also saw a significant increase of 25%, attributed to strong order entry and reduced churn. SAP emphasized the success of its RISE and GROW offerings and announced the launch of a new premium plus package for RISE. The company remains on track to achieve its 2025 goals, focusing on accelerating innovation and driving portfolio efficiency.
Key takeaways from the earnings call include:
- SAP's Q3 2023 financial performance was strong, with cloud revenue growing by 23% and the current cloud backlog increasing by 25%.
- The company's non-IFRS operating profit increased by 16%, and the operating margin improved by 1.9 percentage points compared to the previous year.
- The Business Technology Platform (BTP) was highlighted as the foundation for SAP's success, with over 22,000 BTP live customers contributing to almost 50% of cloud revenue growth.
- SAP's cloud revenue performance was particularly strong in APJ and EMEA regions, while countries like Brazil, India, and the Netherlands experienced outstanding cloud revenue growth.
- SAP executives highlighted the company's relevance in the business AI space and the progress in the adoption of S/4HANA cloud by large complex customers.
- The company's business AI strategy and the acquisition of LeanIX were also highlighted as key elements of its business transformation suite.
- SAP remains focused on achieving its non-financial targets, including net zero emissions by 2030, and expressed confidence in its ability to capitalize on the market opportunity and continue to innovate its solutions.
During the earnings call, SAP executives discussed the company's cloud revenue trajectory and future plans, including collaborations with Microsoft (NASDAQ:MSFT) and the importance of accuracy and data quality in the B2B world. They also discussed the implications of the cloud conversion program on the company's financials.
The executives mentioned that the Americas market experienced a slight decline, potentially due to macroeconomic pressures, but emphasized the success of their GROW offering for mid-market companies. They expressed confidence in the company's revenue outlook and the underlying strength of their portfolio despite challenges.
On the topic of stock-based compensation, the executives aim to keep the number stable and dilute it as a percentage of revenues over time. They consider it a real expense and prioritize its inclusion in their financials.
Finally, they acknowledged the end of maintenance for certain SAP solutions but assured customers of the company's commitment to innovation in the cloud. They also addressed questions about AI pricing and revenue opportunities, emphasizing the value and positive customer feedback of their premium AI offering. They mentioned that AI can be consumed through their products with a consumption-based pricing model.
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