The News: SAP’s revenue for Q1 2023 totaled 7.4 billion euros ($8.12 billion USD), up 10 percent compared to 6.8 billion euros ($7.5 billion USD) one year ago, boosted by a 24 percent rise in its cloud revenue to 3.2 billion euros ($3.5 billion USD). SAP continued to boost its bottom line with healthy cloud revenue as the intelligent cloud ERP software vendor announced its latest earnings on April 21 for the quarter ending on March 31, 2023. Read the full Press Release at SAP.com.
SAP Revenue for Q1 2023 Up 10% to $7.4B Euros, Cloud Up 24%
Analyst Take: SAP’s revenue for the first quarter of fiscal year 2023 (FY2023) saw continuing positive progress for the cloud and business software vendor despite ongoing macroeconomic challenges around the world. This is the kind of performance we expect from a major player like SAP.
Here are SAP’s Q1 fiscal year 2023 results by the numbers:
- Non-IFRS Q1 2023 total revenue of 7.4 billion euros, up 10 percent from 6.8 billion euros for the same quarter one year ago. The Q1 revenue beat analyst estimates of 7.3 euros for the quarter from FactSet.
- Non-IFRS Q1 2023 cloud revenue of 3.2 billion euros, up 24 percent from 2.6 billion euros one year ago.
- Non-IFRS Q1 2023 gross profit of 5.4 billion euros, up 10 percent from 5 billion euros one year ago.
- Non-IFRS Q1 2023 operating profit of 1.9 billion euros, up 12 percent from 1.7 billion euros one year ago.
- Non-IFRS operating margin of 25.2 percent, compared to 24.8 percent one year ago.
- Non-IFRS Q1 2023 free cash flow of 1.96 billion euros, a nine percent decrease from 2.2 billion euros one year ago.
- Non-IFRS Q1 2023 basic earnings per share (EPS) of 1.08 euro per share, up eight percent from 1.00 euro per share one year ago.
SAP Revenue Insights
For SAP, while cloud revenue was up overall, the company did see revenue declines in several of its software groups, including licensing revenue and software support revenue.
Revenue hit 716 million euros in SAP’s S/4HANA cloud group, up 77 percent from 404 million euros one year ago. But SAP S/4HANA cloud software license revenue declined to 276 million euros for the quarter, a 13 percent drop from 317 million euros one year ago. S4/HANA cloud software support fell to 2.90 billion euros, down one percent from 2.92 billion euros one year ago.
SAP’s overall software license and support revenue fell to 6.4 billion euros, down 10 percent from 5.8 billion euros one year ago.
SAP is not alone in seeing some revenue decreases as difficult macroeconomic conditions continue to linger for a wide range of other tech and consumer companies around the world.
SAP’s Revenue and Financial Guidance for FY2023
SAP’s Q1 financials also contained guidance for the company’s full year FY2023 earnings. The company has lowered its guidance due to the pending completion of the sale of its stake in Qualtrics in the second half of 2023, which will lower revenue and other earnings totals.
Previously, SAP said it expected 15.3 billion to 15.7 billion euros in cloud revenue for FY2023, and between 28.2 billion to 28.7 billion euros in cloud and software revenue combined, both in constant currencies. It also previously expected 8.8 billion to 9.1 billion euros in non-IFRS operating profit in constant currencies and free cash flow of about 5.0 billion euros.
The updated SAP guidance for FY2023 includes 14 billion to 14.4 billion euros in cloud revenue at constant currencies, and 26.9 billion to 27.4 billion euros in cloud and software revenue in constant currencies. SAP now expects 8.5 billion to 8.9 billion euros in non-IFRS operating profit in constant currencies and free cash flow of about 4.9 billion euros.
SAP Revenue Overview
Overall, we believe that it was a good quarter for Germany-based SAP, especially as it continues its efforts to develop and secure new markets for its services and products to replace markets lost when it pulled out of Russia and Belarus early in 2022 due to the Russian war in Ukraine. As mentioned earlier, we continue to believe that SAP is up to the task of growing its businesses to replace those lost opportunities. Many other companies also made the same decision to leave those markets due to the war and aggression and had to make similar adjustments.
With its experienced executive team led by CEO Christian Klein, we believe that SAP is on a solid path for the future. SAP was wise several years ago when it dove into cloud services and it has developed a loyal, sustainable, and growing niche with an expanding customer base and a competent portfolio of offerings to fill customer needs. Those smart decisions to go to the cloud are today paying important dividends for the company’s bottom line.
SAP’s products are critical for global businesses from small to large in every industry around the world, making SAP a recurring revenue machine. This continues to be one of the company’s greatest strengths as we continue to watch SAP’s continuing financial progress throughout 2023.
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.
