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Introduction & Market Context
SAP SE (NYSE:SAP) presented its third quarter 2025 financial results on October 22, revealing a mixed performance that featured robust cloud revenue growth but fell short of overall revenue expectations. The company reported total revenue of €9.08 billion, representing 11% year-over-year growth at constant currency, but significantly below analyst forecasts of €10.61 billion. Following the announcement, SAP’s stock declined by 1.51% in aftermarket trading to €276.62.
The enterprise software giant continued its strategic pivot toward cloud services and artificial intelligence integration, with CEO Christian Klein emphasizing AI as "the key enabler for accelerating double-digit total revenue growth through 2027." Despite the revenue miss, SAP maintained its operating profit outlook for the year, targeting the upper end of its guidance range.
Quarterly Performance Highlights
SAP’s third quarter was characterized by strong cloud performance amid overall revenue challenges. The company reported cloud revenue of €5.29 billion, representing a 22% increase (27% at constant currency) compared to the same period last year. Cloud ERP Suite revenue showed even stronger growth at 26% (31% at constant currency), reaching €4.59 billion.
As shown in the following chart of quarterly cloud revenue and profit growth:
The current cloud backlog, a key indicator of future cloud revenue, grew to €18.84 billion, up 23% (27% at constant currency) year-over-year. This metric suggests continued momentum in SAP’s cloud business despite macroeconomic pressures.
Total revenue for the quarter reached €9.08 billion, up 7% (11% at constant currency), while cloud and software revenue grew 8% (12% at constant currency) to €8.02 billion. The company’s IFRS operating profit stood at €2.49 billion, with earnings per share at €1.72, narrowly missing analyst expectations of €1.73.
The comprehensive financial results are illustrated below:
Regional Performance
SAP’s performance varied significantly across regions, with EMEA (Europe, Middle East, and Africa) showing the strongest cloud revenue growth at 30% (32% at constant currency). The Americas region posted 13% growth (20% at constant currency) in cloud revenue, while the Asia-Pacific Japan (APJ) region grew by 24% (33% at constant currency).
The regional breakdown of cloud and software revenue is depicted in the following map:
Notably, France, Germany, and Italy were highlighted as strong performers in the EMEA region, while Brazil stood out in the Americas. In the APJ region, India and South Korea showed particularly strong results, underscoring SAP’s global reach and diversification.
AI Strategy & Product Innovation
A significant portion of SAP’s presentation focused on the company’s AI strategy and product innovation. SAP is positioning itself as a leader in enterprise AI integration, emphasizing the unification of applications, data, and artificial intelligence as a key competitive advantage.
The company contrasted its approach with the traditional "best of breed" model, illustrating how SAP’s integrated approach creates a "flywheel" effect:
SAP also highlighted its internal AI adoption, reporting over 200 internal AI use cases already implemented. The company has enabled more than 30,000 engineers with AI tools, with approximately 70,000 code change submissions checked by AI monthly. Additionally, over 40% of first contact customer support requests are now solved using agentic AI.
The comprehensive internal AI adoption metrics are shown below:
This internal implementation serves as both a proof of concept and a showcase for customers, demonstrating SAP’s commitment to AI-driven transformation. The company reported "triple-digit million value" from AI-enabled efficiencies, suggesting significant return on investment from these initiatives.
Forward-Looking Statements
Looking ahead, SAP provided an updated outlook for 2025, guiding toward the lower end of its cloud revenue range (€21.6-21.9 billion) but the upper end of its operating profit range (€10.3-10.6 billion). The company expects free cash flow to reach €8.0-8.2 billion, with an effective tax rate of approximately 32%.
The company’s outlook through 2027 is illustrated in the following chart:
SAP also provided non-financial metrics in its outlook, targeting an employee engagement index of 74-78%, a customer Net Promoter Score of 12-16, and a Business Health Culture Index of 80-82%.
CFO Dominik Asam noted that the company expects currency impacts to continue affecting reported results, with a projected negative impact on Q4 2025 cloud revenue growth of approximately 5 percentage points, assuming an exchange rate of 1.17 USD per EUR.
Competitive Industry Position
SAP continues to maintain a strong competitive position in the enterprise software market, with a diverse customer base that includes many of the world’s largest corporations. The presentation highlighted logos from companies such as ABB, Alphabet, Deloitte, Lufthansa, Nestlé, VISA, and Volkswagen, among others.
The company faces increasing competition, particularly from Oracle in the cloud ERP market, as noted during the earnings call Q&A session. However, SAP emphasized its differentiated approach focusing on business process AI and the integration of applications, data, and AI capabilities.
Conclusion
SAP’s Q3 2025 presentation reveals a company in transition, with strong momentum in its strategic cloud business but challenges in meeting overall revenue expectations. The 14.42% revenue miss relative to analyst forecasts overshadowed otherwise positive growth metrics, particularly in cloud services.
The company’s heavy investment in AI, both internally and in its product offerings, positions it for potential future growth, though execution risks remain. With guidance pointing to the lower end of cloud revenue expectations but stronger operating profit, SAP appears to be focusing on profitability while navigating macroeconomic headwinds.
Investors will be watching closely to see if SAP’s AI-driven strategy can deliver the accelerated revenue growth the company projects through 2027, and whether the current cloud momentum can offset challenges in other areas of the business.
Full presentation:
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