The News: SAP’s Q2 revenue for 2023 rose to €7.55 billion ($8.4 billion), up 5% from €7.2 billion ($8.01 billion) one year ago. For the second quarter in a row, the increase was attributable to a 19% rise in cloud revenue, this time to €3.3 billion ($3.7 billion), as the intelligent cloud ERP software vendor announced its latest earnings on July 20 for the period ending June 30, 2023. Read the full Q2 earnings press release on the SAP investor relations website.
SAP Q2 Revenue Reaches €7.55 Billion, up 5%, as Cloud Climbs
Analyst Take: SAP’s Q2 revenue of €7.55 billion came in a bit lower than analyst consensus estimates of €7.6 billion for the quarter, but the company clearly sees progress as it raised its second half earnings guidance for cloud and software revenue and non-IFRS operating profit through the end of fiscal year 2023. None of this is surprising, we believe, as the world economy is still coming out from under the wide-ranging effects of the disruptive Covid-19 pandemic, which 3 years later continues to influence global macroeconomic conditions.
For SAP, cloud revenue gains continued to boost SAP’s fortunes in Q2.
Here are SAP’s Q2 results by the numbers:
- IFRS Q2 2023 total revenue of €7.55 billion, up 5% from €7.2 billion for the same quarter YoY. The Q2 revenue just missed analyst consensus estimates of €7.6 billion.
- Non-IFRS Q2 2023 cloud revenue of €3.3 billion, up 19% from €2.8 billion YoY.
- Non-IFRS Q2 2023 SAP S/4HANA cloud revenue of €823 million, up 74% from €472 million YoY.
- Non-IFRS Q2 2023 gross profit of €5.58 billion, up 4% YoY.
- Non- IFRS Q2 2023 operating profit of €2.06 billion, up 23% from €2.46 billion one year ago.
- Non-IFRS Q2 2023 basic earnings per share (EPS) of €1.07 euros per share, up 12% YoY.
- Non-IFRS Q2 2023 gross profit margin of 73.8%.
- Non-IFRS Q2 2023 cloud gross profit of €2.4 billion, up 20% YoY.
- Non-IFRS Q2 2023 cloud gross profit margin of 72.2%.
- Q2 2023 current cloud backlog of €11.54 billion, up 21% YoY.
SAP Q2 Revenue Insights
For SAP and a wide range of other tech and consumer companies, lingering global macroeconomic challenges continue to affect corporate earnings. SAP has had to adjust like its competitors and most every other business, and in Q1 underwent the layoffs of about 3,000 employees. For SAP, we see the company continuing to make the needed changes that will allow it to fulfill its cloud focus to better serve its customers. We are confident that SAP is making wise moves to reach these goals.
For SAP, two bright spots in its Q2 earnings are its healthy 19% increase in overall cloud revenue and its SAP S/4HANA cloud revenue rise, which grew by an impressive 74% to €823 million for Q2, up from €472 million YoY. These numbers, we believe, show that SAP’s products are meeting customer needs and inspiring deployment growth and customer loyalty.
SAP’s 2023 Financial Guidance
SAP’s Q2 financials also contained guidance for the company’s full year 2023 earnings.
For FY2023, SAP expects €14 billion to €14.2 billion in cloud revenue at constant currencies, up 23% to 24% at constant currencies, narrowing the range by €200 million. The company also expects between €27 billion and €27.4 billion at constant currencies in cloud and software revenue combined, up from €26.9 billion to €27.4 billion and narrowing the range by €100 million.
SAP said it expects €8.65 billion to €8.95 billion in non-IFRS operating profit at constant currencies, up 8% to 12% at constant currencies, raising the operating profit outlook by €50 million. The previous range was €8.6 billion to €8.9 billion.
SAP Q2 Revenue Overview
SAP, a German company doing much of its business in Europe, has experienced more challenging macroeconomic conditions that have cut into its business since the pandemic began, especially compared to other companies doing more business elsewhere around the world. That includes the negative financial impacts from the war in Ukraine, which resulted in revenue declines that followed SAP’s business shutdowns in Russia and Belarus after the start of the war. In 2023, we believe that these negative business effects remain more significant for SAP than for other companies around the world.
Yet despite those economic challenges, we continue to believe that through the guidance of its experienced leadership team, led by CEO Christian Klein, SAP will be able to get through this environment and exit in a stronger business position.
All of this proves the wisdom of SAP’s moves into cloud services over the last few years, where it found a sustainable and growing niche with its growing customer base. We see those earlier smart decisions as still paying important dividends for the company’s bottom line.
SAP’s broad enterprise software and cloud product portfolio and business remains solid and is critical for customers around the world. We continue to remain bullish on SAP and will watch with interest as it continues to serve its customers throughout 2023 and beyond.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discussed 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.
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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.
