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SAP SE (NYSE:SAP) delivered strong first-quarter results for 2025, showcasing accelerated cloud revenue growth and a dramatic surge in operating profit, according to the company’s earnings presentation released on April 22, 2025. The software giant’s shares rose 2.6% in after-hours trading to $259, reflecting investor confidence in the company’s continued cloud transformation and AI-driven growth strategy.
Quarterly Performance Highlights
SAP reported cloud revenue of €4,993 million for Q1 2025, representing a 27% year-over-year increase (26% at constant currency). The company’s cloud backlog grew to €18,202 million, up 28% (29% at constant currency), indicating strong future revenue potential. Total (EPA:TTEF) revenue reached €9,013 million, growing 12% (11% at constant currency).
The most impressive metric was non-IFRS operating profit, which surged 60% year-over-year (58% at constant currency) to €2,455 million, significantly outpacing revenue growth and demonstrating the scalability of SAP’s cloud business model.
As shown in the following comprehensive financial results summary:
Cloud ERP Suite revenue, which now accounts for approximately 85% of SAP’s cloud revenue, grew by 34% (33% at constant currency) to €4,251 million. This represents the twelfth consecutive quarter of cloud ERP suite growth above 30%, continuing the strong momentum seen in previous quarters.
The company’s cloud gross margin improved to 75.0%, up from 72.5% in Q1 2024, reflecting increased efficiency in cloud operations and economies of scale. This margin expansion contributed significantly to the overall profitability improvement.
Free cash flow grew by 36% to €3,583 million, while basic earnings per share (non-IFRS) increased by 79% to €1.44, demonstrating the company’s ability to convert growth into shareholder value.
Strategic Initiatives
SAP highlighted several strategic initiatives during the presentation, with a particular focus on its AI and data strategy. The company introduced the SAP Business Data Cloud as a new "center of gravity" for business data, integrating finance, HR, supply chain, and third-party information.
The following diagram illustrates the SAP Business Data Cloud architecture:
Building on this data foundation, SAP is advancing its "agentic AI" strategy, connecting SAP Business AI with the Business Data Cloud and SAP Applications through a Knowledge Graph. This integrated approach enables AI agents across various business functions, including customer experience, analytics, finance, supply chain, and HR.
The company reported early success with its AI initiatives, noting that "80% support self-service rate for customers" is now achieved via AI-driven issue resolution. Additionally, consultants are saving up to 90 minutes per day with "Joule for Consultants," the company’s AI assistant.
These innovations appear to build upon the momentum SAP reported in its Q3 2024 earnings, where the company noted that approximately 30% of cloud order entry included AI use cases.
Regional Performance
SAP’s growth was geographically broad-based, with particularly strong performance in the Asia-Pacific and Japan (APJ) region, where cloud revenue grew by 39% and cloud & software revenue increased by 21%.
The Europe, Middle East, and Africa (EMEA) region delivered 30% growth in cloud revenue and 14% growth in cloud & software revenue. The Americas region, while still strong, showed somewhat slower growth with cloud revenue up 21% and cloud & software revenue increasing by 12%.
The following map illustrates the regional revenue performance:
Financial Outlook
Looking ahead, SAP provided a positive outlook for the full year 2025, projecting cloud revenue of €21.6 - €21.9 billion, representing growth of 26-28%. Cloud and software revenue is expected to reach €33.1 - €33.6 billion, up 11-13%.
The company forecasts non-IFRS operating profit of €10.3 - €10.6 billion, representing growth of 26-30%, and free cash flow of approximately €8.0 billion.
This outlook builds on the momentum SAP established in 2024, when the company raised its operating profit outlook following strong Q3 results. The continued acceleration in cloud revenue growth and significant margin expansion suggests SAP’s cloud transformation strategy is yielding results ahead of expectations.
Executive Commentary
"Q1 was a fast-paced start into the year," stated the company in its presentation, highlighting the acceleration of cloud growth and the success of strategic initiatives.
While the presentation was led by CEO Christian Klein and CFO Dominik Asam, specific executive quotes were not included in the slides. However, the presentation emphasized the company’s focus on business AI, data integration, and simplification as key drivers of future growth.
The results demonstrate that SAP’s multi-year cloud transformation, which began in earnest four years ago, is now delivering substantial returns in terms of both growth and profitability. With cloud now representing a majority of the company’s business and continuing to grow at high rates, SAP appears well-positioned to maintain its leadership in enterprise software while successfully transitioning to a cloud-first business model.
Full presentation:
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