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Investing.com - German software giant SAP SE (ETR:SAPG) (NYSE: SAP) on Tuesday raised its fiscal 2025 outlook, forecasting a significant increase in operating profit on accelerating cloud revenue growth and its strengthened position in business AI and data capabilities.
The company expects fiscal 2025 operating profit to reach 10.3 billion euros – 10.6 billion euros ($10.75 billion- $11.06 billion), a jump of 26% –30% at constant currencies from 2024.
SAP had earlier said it was aiming for operating profit of around 10.2 billion euros, along with overall revenue of over 37.5 billion euros and more than 21.5 billion euros in cloud revenue.
Cloud revenue is projected to grow by 26–28% to 21.6 billion euros – 21.9 billion euros in 2025, supported by robust customer demand for its flagship Cloud ERP Suite and its RISE with SAP offering, which helps clients transition to cloud-based enterprise solutions.
“Looking ahead, our strong position in data and Business AI gives us additional confidence that we will accelerate revenue growth through 2027,” said CEO Christian Klein in a statement.
For its fiscal year 2024, SAP posted operating profit for 2024 was up 25% to 8.15 billion euros, reflecting solid profitability despite restructuring costs tied to the group’s transformation program.
Annual cloud revenue rose 25% to 17.1 billion euros. Total revenue grew 10% year-over-year to 34.2 billion euros, driven by a 33% surge in Cloud ERP Suite revenue.
In the fourth quarter, cloud revenue jumped 27% to 4.71 billion euros, with cloud gross margin improving by 1.3 percentage points to 73.5%. Overall revenue increased 11% year-over-year to 9.38 billion euros, while non-IFRS operating profit grew 24% to 2.44 billion euros.
SAP’s free cash flow for 2024 came in at 4.1 billion euros, down 19% from 2023, due to higher restructuring payouts. However, the company anticipates free cash flow will nearly double in 2025 to approximately 8 billion euros.
""We see the results as supportive of our positive view on SAP, underpinned by the group’s execution on idiosyncratic opportunities creating room for mid-term growth and margin improvement,” analysts at Citi said in a note to clients.
Germany-listed shares in SAP were largely flat in early trading on Tuesday.
(Ayushman Ojha and Reuters contributed reporting.)