Sap Se

SAP reported Q2 2026 cloud revenue of EUR 6.3 billion, up 24%, total revenue of EUR 9.9 billion, up 11%, IFRS operating profit of EUR 2.6 billion, up 8%, and non-IFRS operating profit of EUR 2.7 billion, up 9%. IFRS earnings per share increased 30% to EUR 1.89, while non-IFRS EPS increased 6% to EUR 1.59. 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. Free cash flow was EUR 3 billion, and current cloud backlog grew 26% to almost EUR 23 billion. For the full year, SAP said it is maintaining all top-line guidance and free cash flow guidance, while lowering operating profit outlook by EUR 0.1 billion to reflect the dilution from recent acquisitions; management also said Dremio and Prior Labs will weigh on H2 2026 by a very low triple-digit million euro amount.

Christian Klein framed the quarter as evidence that SAP’s cloud transformation is now translating into an AI-led transition, not just a software migration story. He emphasized strong customer response to Sapphire, oversubscribed beta programs, and the idea that SAP can combine enterprise data, governance, and agentic AI in a way competitors cannot. His tone was confident and expansive, with repeated emphasis that SAP can monetize AI through outcome-based pricing and by embedding agents into core business processes.

Dominik Asam said the quarter was strong, supported by sustained backlog growth and robust free cash flow, but still shaped by a complex macro backdrop and Middle East uncertainty. He highlighted IFRS cloud gross margin of 74.3% and non-IFRS cloud gross margin of 74.6%, plus IFRS EPS of EUR 1.89 and non-IFRS EPS of EUR 1.59. He also pointed to higher R&D investment, marketing tied to the Autonomous Enterprise launch, and acquisition dilution as the main reasons for slower operating profit growth, while reiterating the 80% to 90% expense-to-revenue framework and saying SAP remains on track with its original organic operating profit plan excluding M&A.

Analysts focused on why operating profit growth slowed in Q2, whether SAP still has room for margin expansion, and how much AI spending will pay off. Management said Q2 was a “special quarter” with temporary factors including stock-based compensation, R&D ramp, marketing spend, and acquisition dilution, and argued the company is still within its operating leverage envelope. On top-line visibility, management said backlog and pipeline are strong after Sapphire, but still sees slight deceleration risk in current cloud backlog because of macro uncertainty, especially in the Middle East. Questions on Dremio, Prior Labs, and the EU maintenance ruling were answered by stressing that the acquisitions are about data, ontology, and agent monetization rather than near-term growth, and that maintenance flexibility is manageable as customers continue moving to cloud and RISE.