The News: SAP’s fourth quarter (Q4) revenue rose to €8.47 billion ($9.17 billion) in Q4 2023, up 5% from €8.06 billion one year ago, as the intelligent cloud enterprise resource planning (ERP) software vendor announced its Q4 and FY 2023 earnings on January 24 for the period ending December 31, 2023. For the full year, SAP reported total revenue of €31.2 billion, up 6% from the previous year. SAP’s cloud revenue was up 20% in the quarter to €3.70 billion, and its S/4HANA cloud revenue grew 55% to €1.03 billion. You can read the financial release detailing SAP’s Q4 and FY results on SAP’s investor relations website.
SAP Meets or Exceeds All Key Financial Metrics for FY 2023
Analyst Take: SAP’s Q4 revenue of €8.47 billion grew 5% year-over-year (YoY), and the company’s FY 2023 revenue of €31.2 billion jumped by 6% YoY, marking the software vendor’s continuing success in a crowded business marketplace. Under the leadership of CEO Christian Klein and his executive team, SAP has focused its efforts on transitioning its large customers to the cloud and is reaping the rewards.
Here are SAP’s Q4 and FY 2023 results by the numbers:
- IFRS Q4 2023 total revenue of €8.47 billion, up 5% from €8.06 billion for the same quarter YoY
- Non-IFRS Q4 2023 cloud revenue of €3.70 billion, up 20% from €3.08 billion YoY
- Non-IFRS Q4 2023 SAP S/4HANA cloud revenue of €1.03 billion, up 55% from €662 million YoY
- Non-IFRS Q4 2023 basic earnings per share (EPS) of €1.41 per share, up 41% YoY
- Non-IFRS FY 2023 total revenue of €31.21 billion, up 6% YoY
- Non-IFRS FY 2023 cloud revenue of €13.66 billion, up 20% YoY
- Non-IFRS FY 2023 SAP S/4HANA cloud revenue of €3.50 billion, up 67% YoY from €2.09 billion
- Non-IFRS Q4 2023 gross profit of €23.10 billion, up 74% YoY
SAP Q4 and FY 2023 Revenue Insights
SAP’s Q4 and FY 2023 earnings results continue to show that the company has not only been able to set its course to higher growth but also execute on that vision. SAP has stated that its transition to the cloud is the smartest path to ensuring sustainable growth. Although that strategy has, at times, been met with skepticism, the company is proving the naysayers wrong with quarter after quarter of growth in its cloud business revenue, as well as a continually growing roster of new logos.
Indeed, as SAP CEO Klein noted on the earnings call with analysts, strong customer momentum continues to power results, highlighting Vodafone, EMS (a Brazilian pharma company), and Volkswagen, each of which are leveraging SAP’s cloud offerings. Furthermore, SAP is leaning into the use of AI to improve processes and workflows within its cloud offerings, announcing a partnership with NVIDIA to bring more advanced generative AI capabilities into RISE with SAP.
SAP Q4 Revenue Overview
The proof of the success of the strategy is in the numbers. In Q4, SAP posted sequential growth rate increases in both current cloud backlog and cloud revenue, with current cloud backlog rising 25% to €13.75 billion, up 27% at constant currencies, achieving its fastest pace on record. Meanwhile, SAP S/4HANA current cloud backlog was up 58% to €5.05 billion, up 61% at constant currencies.
SAP has made a transition to the cloud the centerpiece of its longer-term strategy, and the most recent quarter indicates that it is working. Q4 2023 cloud revenue rose 20% to €3.70 billion, up 25% at constant currencies. The growth was driven primarily by the strength of SAP’s combined SaaS and PaaS portfolio, which was up 22%, up 28% at constant currencies. SAP S/4HANA cloud revenue rose 55% to €1.03 billion, up 61% at constant currencies.
Q4 2023 cloud and software revenue was up 6% to €7.39 billion, and up 10% at constant currencies. SAP’s Services revenue was flat at €1.08 billion, but up 4% at constant currencies. The company’s total revenue was up 5% to €8.47 billion and up 9% at constant currencies.
For the full year 2023, SAP reported cloud revenue rose 20% to €13.66 billion, up 23% at constant currencies, mainly driven by strong double-digit growth across the SaaS and PaaS portfolio, which was up 23% and up 26% at constant currencies. Cloud and software revenue for FY 2023 was up 6% to €26.93 billion, up 9% at constant currencies. Services revenue was up 4% to €4.28 billion, up 6% at constant currencies, and total revenue increased 6% to €31.21 billion, up 9% at constant currencies. And SAP reported a current cloud backlog of €13.7 billion, up 25%, up 27% at constant currencies.
SAP’s Continuing 2024 Financial Guidance
In addition to its current results, SAP announced its continuing 2024 financial guidance, which includes the following:
- €17.0-€17.3 billion cloud revenue at constant currencies (2023: €13.66 billion), up 24% to 27% at constant currencies.
- €29.0-€29.5 billion cloud and software revenue at constant currencies (2023: €26.93 billion), up 8% to 10% at constant currencies.
- €7.6-€7.9 billion non-IFRS operating profit at constant currencies (2023: €6.51 billion based on updated non-IFRS operating profit definition), up 17% to 21% at constant currencies.
As part of the company’s continuing strategy to shift toward AI, SAP announced a new restructuring program that will involve 8,000 workers either being retrained or reskilled or offered buyouts. This transformation program is designed to cut costs and help accelerate the firm’s embrace of AI and will include a charge of approximately €2 billion for payouts associated with the program, according to the company.
Despite the negative implications of the restructuring, we believe that SAP is taking the appropriate approach to embracing AI and looking to reskill workers to ensure they are deployed in the right areas to continue to propel the company forward. In addition, the company indicated it would likely end 2024 with a similar headcount, portending that it will probably be making hires as the company continues to focus on the deployment of business AI across the company’s portfolio. Looking forward into 2024, the big focus for SAP must remain on upgrading and moving customers to clean core. We remain bullish on SAP and its ability to deliver innovative products and services to its customers in 2024 and beyond.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discusses SAP’s earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other Insights from The Futurum Group:
SAP Announces AI Capabilities to Improve Retail Business Processes
SAP’s Generative AI Copilot, Joule, Coming to SAP Applications
SAP Q3 Revenue Up 4% to €7.74 Billion as Cloud Growth Continues
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
Keith has over 25 years of experience in research, marketing, and consulting-based fields.
He has authored in-depth reports and market forecast studies covering artificial intelligence, biometrics, data analytics, robotics, high performance computing, and quantum computing, with a specific focus on the use of these technologies within large enterprise organizations and SMBs. He has also established strong working relationships with the international technology vendor community and is a frequent speaker at industry conferences and events.
In his career as a financial and technology journalist he has written for national and trade publications, including BusinessWeek, CNBC.com, Investment Dealers’ Digest, The Red Herring, The Communications of the ACM, and Mobile Computing & Communications, among others.
He is a member of the Association of Independent Information Professionals (AIIP).
Keith holds dual Bachelor of Arts degrees in Magazine Journalism and Sociology from Syracuse University.
