SAP SE

SAP reported Q2 non-IFRS revenue of EUR 9.9 billion, up 11% year over year, with cloud revenue up 24% to EUR 6.3 billion and cloud ERP suite revenue up 27%. Current cloud backlog was almost EUR 23 billion, up 26%, and non-IFRS operating profit was EUR 2.7 billion, up 9%, versus IFRS operating profit of EUR 2.6 billion, up 8%; IFRS cloud gross margin was 74.3% and non-IFRS cloud gross margin was 74.6%, down 0.7 percentage points year over year at constant currencies. IFRS EPS was EUR 1.89, up 30%, and non-IFRS EPS was EUR 1.59, up 6%; free cash flow was EUR 3 billion. SAP said it is maintaining its financial outlook for all top-line parameters and free cash flow, while reducing operating profit outlook by EUR 0.1 billion because of the dilutive impact of Dremio and Prior Labs; it also said CCB growth should slightly decelerate exiting the year.

Christian Klein framed the quarter as strong, emphasizing record Sapphire attendance, pipeline generation, and positive customer feedback on the Autonomous Enterprise launch. He said AI and SAP Business Data Cloud were embedded in more than 90% of the 50 largest deals and argued SAP is leading in agentic AI because it combines applications, data, governance, and model flexibility. His tone was confident and strategic, with repeated emphasis that customers want both ERP modernization and AI adoption, and that SAP can monetize AI through outcome-based pricing and a broadened agent platform.

Dominik Asam highlighted sustained backlog growth and improving free cash flow, but noted the operating environment remains uncertain, especially due to the Middle East conflict. He said non-IFRS cloud gross margin was 74.6% and explained the Q2 operating profit moderation by lower cloud growth versus Q1, unusually low stock-based compensation in Q1, higher R&D and marketing spend, and the impact of the Reltio acquisition; he also said Dremio and Prior Labs will weigh on H2 by a very low triple-digit million euro amount. He reiterated the operating leverage framework, said SAP still targets an 80% to 90% expense-to-revenue ratio, and emphasized that the company remains on track with its initial non-IFRS operating profit outlook excluding M&A effects.

Analysts pressed on why SAP cut operating profit guidance despite strong backlog and why cloud revenue appears set to decelerate in H2. Management said Q2 was unusually loaded with one-time and comparability effects, that the acquisitions are intentionally being absorbed so SAP can preserve room for growth, and that the business is still on track within its operating leverage corridor. Questions also focused on AI investment returns, R&D cost growth, and whether the new European maintenance ruling could keep customers on ECC longer; SAP said the maintenance change is manageable, cloud migration and RISE/GROW continue to offset legacy risk, and any effect from Dremio and Prior Labs on revenue/CCB is negligible.