Analyst(s): Keith Kirkpatrick and Daniel Newman
Publication Date: April 23, 2025
SAP’s Q1 FY 2025 earnings highlight the strength of its cloud transformation, with ERP solutions leading the growth momentum. The company’s improved profitability and cash flow reinforce the benefits of its recurring revenue model, even as macro uncertainty lingers.
What is Covered in this Article:
- SAP’s Q1 FY 2025 financial results
- Growth momentum in Cloud ERP and recurring revenue streams
- Cloud backlog trends and implications for FY 2025 visibility
- Launch and early traction of SAP Business Data Cloud and embedded AI strategy
- Reaffirmation of FY 2025 guidance amid tariff risk and macro uncertainty
The News: SAP SE (NYSE: SAP) announced its Q1 FY 2025 results, reporting total revenue of €9.0 billion (-0.7% below consensus estimates), up 12% year-on-year (YoY) and 11% in constant currency (cc). Cloud revenue rose 27% YoY (26% cc) to €5.0 billion, driven by a 34% YoY (33% cc) increase in Cloud ERP Suite sales. The cloud backlog increased 28% YoY (29% cc) to €12.8 billion. Non-IFRS operating profit grew 60% YoY (58% cc) to €2.5 billion (+10% above consensus estimates), while non-IFRS operating margin expanded to 27.2%, up 810 basis points (bps) YoY. Non-IFRS net profit rose 78% to €1.7 billion (+11.6% above consensus estimates), with non-IFRS earnings per share of €1.44 (+10.9% above consensus estimates), compared to €0.81 a year ago. Free cash flow improved 36% YoY to €3.6 billion.
“With a share of more predictable revenue of 86%, SAP’s business model remains resilient in uncertain times,” said Christian Klein, CEO of SAP SE. “Our AI-powered portfolio enables companies to navigate supply chain disruptions in over 130 countries and to unlock efficiencies with agility and speed.”
SAP Q1 FY 2025 Results Exceed Profit Forecasts as Cloud ERP Drives Growth
Analyst Take: SAP’s Q1 FY 2025 results highlight a deepening pivot toward profitable cloud scale. While total revenue came in slightly below expectations, the company delivered strong growth in cloud backlog, operating profit, and net income, demonstrating solid execution of its cloud transition strategy.
With 86% of revenue now recurring, SAP enters the fiscal year with high earnings visibility and greater control over cash flows, even against macroeconomic uncertainty and looming recession risks in the US.
Growth programs like RISE and GROW continue accelerating migrations across large and mid-sized enterprises, supported by pricing incentives and bundled offerings. Simultaneously, SAP’s AI-powered suite is emerging as a long-term differentiator, designed to drive upsell potential and deepen customer retention.
Revenue Quality Improves as Predictable Income Mix Deepens
SAP’s revenue profile continues to shift in favor of durability and visibility. In Q1 FY 2025, the share of more predictable revenue rose to 86%, up 200 bps YoY, reflecting the continued shift from license to cloud subscriptions, now driving 55% of sales. A 3% YoY constant currency decline in license and support revenue highlights accelerating customer preference for bundled cloud solutions under RISE and GROW. These packages offer faster deployment, flexible pricing, and integrated services, making them more attractive in today’s cost-sensitive environment.
This mix shift is lifting earnings quality – cloud gross profit increased 31% YoY and overall operating profit margin expanded by 810 bps YoY, reflecting growth in scale and margin improvement from higher attach rates of adjacent services. With fewer upfront licenses and more recurring revenue, SAP is achieving smoother income recognition and stronger margin leverage, even while funding AI innovation – an advantage that enhances resilience and predictability in today’s uncertain economic and IT spending environment.
Backlog Momentum Supports Visibility Into FY 2025 Cloud Revenue
Cloud backlog growth of 29% YoY in constant currency – up from 28% a year ago – provides clear visibility into continued cloud revenue expansion in FY 2025. Long-cycle programs such as RISE with SAP remain central to the conversion of large on-premise deployments, particularly among complex, heavily customized ERP environments. With fewer than one in three of SAP’s 30,000+ ERP customers having moved to S/4HANA Cloud, the addressable base remains significant. These migrations also drive incremental adoption of transactional software – including Concur, Ariba, and Fieldglass – boosting revenue per customer through broader solution integration. Additionally, the FY 2027 end-of-support deadline for legacy on-premise products acts as a structural catalyst, sustaining backlog growth over the medium term and reinforcing multi-year revenue visibility.
However, RISE with SAP and GROW with SAP migration programs may face headwinds, particularly if global economic conditions deteriorate, given the significant financial and operational issues involved with cloud migrations. If customers feel an economic pinch, they may delay any cloud migration activity further until economic turmoil subsides.
Business Data Cloud Builds Scalable Foundation for Embedded AI Growth
SAP is embedding generative AI across its suite to automate high-frequency workflows in finance, HR, and procurement to lift productivity and reduce costs. In support of this strategy, the company launched the Business Data Cloud in Q1 FY 2025 – a unified semantic layer designed to integrate structured and unstructured data from SAP and non-SAP systems. The platform secured 20 customer wins in its debut quarter, including KION Group, Ferring Pharmaceuticals, and Villeroy & Boch, indicating early traction across sectors. This foundation improves data quality for AI use cases and enables context-rich automation through SAP’s business agents. With many deals already embedding AI components, SAP enhances long-term upsell potential and customer stickiness. The company’s architecture – combining harmonized data, a dedicated AI stack, and deeply integrated apps – positions it to capture growing enterprise demand for operational AI, even as broader IT budgets face macro pressure.
Strong Guidance Reaffirmed Amid Tariff Risk and Economic Uncertainty
SAP reaffirmed its FY 2025 guidance despite ongoing macroeconomic headwinds and escalating global trade tensions. The company projects cloud revenue of €21.6–21.9 billion (+26–28% YoY cc), cloud and software revenue of €33.1–33.6 billion (+11–13% YoY cc), and non-IFRS operating profit of €10.3–10.6 billion (+26–30% YoY cc). Free cash flow is expected to reach approximately €8.0 billion, nearly doubling YoY.
SAP remains structurally insulated from US trade barriers, supported by its contract-driven, recurring revenue base and geographically diversified cloud infrastructure. Furthermore, because the company has limited exposure to consumer markets and does not ship any physical goods that can be tariffed, SAP should be more immune to market volatility.
These structural advantages are reflected in strong cloud backlog growth and management’s confidence to hold guidance steady. As customers seek cost-efficiency and resilience amid trade uncertainty, SAP’s portfolio, centered on automation, compliance, and productivity, positions it to support decision-making and sustain pipeline conversion. Accelerating digital transformation and rising regulatory complexity further reinforce the adoption of SAP’s mission-critical suite, supporting long-term margin durability through a volatile external environment.
See the complete press release on SAP’s fiscal Q1 FY 2025 financial results on the SAP website.
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 and Databricks Launch SAP Business Data Cloud
SAP Embeds AI Across SuccessFactors Suite: Transforming Workforce Management
Will SAP’s Approach to AI Resonate with Customers & Prospects?
Author Information
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.
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.
