The News: SAP’s revenue for Q4 2022 rose six percent to 8.43 billion euros ($9.1 billion USD) in the quarter compared to 7.9 billion euros ($8.58 billion USD) one year ago, boosted by a 30 percent rise in its cloud revenue to 3.4 billion euros ($3.7 billion USD). Increases in cloud revenue continued to boost SAP’s bottom line as the intelligent cloud ERP software vendor announced its latest earnings on January 26 for the quarter and fiscal year ending on December 31, 2022. Read the full Press Release at SAP.com.
SAP Revenue for Q4 2022 Up 6% to $8.4B Euros as Cloud Up 30%
Analyst Take: SAP’s revenue for the fourth quarter saw another sequential quarter of healthy cloud revenue increases for the cloud and business software vendor, even as other tech companies are having tougher times with their earnings as uncertain markets and challenging global macroeconomic conditions continue.
For SAP, cloud revenue again was one of the company’s high points in Q4 and in the full year of 2022.
Here are SAP’s Q4 and full FY2022 results by the numbers:
- IFRS Q4 2022 total revenue of 8.43 billion euros, up six percent from 7.9 billion euros for the same quarter in 2021. The Q4 revenue just missed analyst estimates of 8.48 billion euros from Consensus Gurus.
- IFRS Q4 2022 cloud revenue of 3.39 billion euros, up 30 percent from 2.6 billion euros one year ago.
- IFRS Q4 2022 gross profit of 6.06 billion euros, up four percent from 5.8 billion euros one year ago.
- IFRS Q4 2022 operating profit of 2.58 billion euros, up five percent from 2.46 billion euros one year ago.
- Non-IFRS Q4 2022 free cash flow of 1.80 billion euros, a 97 percent increase from 916 million euros one year ago.
- Non-IFRS Q4 2022 basic earnings per share (EPS) of 1.0 euros per share, down 46 percent from 1.85 euros per share one year ago. The Q4 2022 EPS missed a 1.35 euro share price estimate from Consensus Gurus.
- IFRS FY2022 total revenue of 30.87 billion euros, up 11 percent from 27.84 billion euros one year ago.
- IFRS FY2022 cloud revenue of 12.55 billion euros, up 33 percent from 9.41 billion euros one year ago.
- IFRS FY2022 gross profit of 21.93 billion euros, up 10 percent from 19.89 billion euros one year ago.
- IFRS FY2022 operating profit of 4.67 billion euros, flat from 4.65 billion euros one year ago.
- Non-IFRS FY2022 free cash flow of 4.34 billion euros, a 14 percent drop from 5.04 billion euros one year ago.
- IFRS FY2022 basic EPS of 196 euros per share, down 56 percent from 4.46 euros per share one year ago.
SAP Revenue Insights
For SAP, its misses on the analyst consensus estimates for Q4 revenue and Q4 EPS are narrow and come across tougher macroeconomic conditions being experienced by SAP and a wide range of other tech and consumer companies. This is something we are seeing across much of the tech and consumer marketplaces.
SAP also announced on Jan. 26 that it plans to cut 3,000 jobs, or about 2.5 percent of its global workforce, as it looks to trim expenses. The planned staff reductions arrive as other tech vendors are also paring workers. IBM is cutting 3,900 jobs, Microsoft is cutting 10,000 workers, Amazon is cutting 18,000, Alphabet is cutting 10,000, and Salesforce is cutting 8,000, while others are also making cuts.
We are not surprised by these staff reduction moves throughout the marketplace. We expect that nearly every tech company will use this moment to do some trimming of expenses. Over-hiring was pervasive since the Covid-19 pandemic and work from home began in March 2020 and we are all now witnessing the correction. This is certainly not unique to SAP.
In the case of SAP, we see these moves as more of a restructuring toward fulfilling its cloud focus, which is a growth vector for the company that requires more investment. While these are difficult moments, sometimes capital must be freed up to execute against a strategy. We believe that is SAP’s intention here.
SAP Cloud Revenue by Region
SAP’s Q4 cloud revenue performance was impressive across all regions. EMEA IFRS cloud revenue reached 1.17 billion euros, up 29 percent from 910 million euros one year ago. Americas IFRS cloud revenue hit 1.8 billion euros, up 31 percent from 1.37 billion euros one year ago. Asia Pacific and Japan (APJ) IFRS cloud revenue for the quarter came in at 417 million euros, up 28 percent from 326 million euros one year ago.
SAP’s 2023 Financial Guidance
SAP’s Q4 and FY2022 financials also contained guidance for the company’s full year 2023 earnings.
For FY2023, SAP expects 15.3 billion to 15.7 billion euros in cloud revenue, and between 28.2 billion to 28.7 billion euros in cloud and software revenue combined. SAP also said it expects 8.8 billion to 9.1 billion euros in non-IFRS operating profit and free cash flow of about 5.0 billion euros.
SAP 2023 Analyst Overview
For SAP, a German company doing much of its business in Europe, the negative financial impacts of the war in Ukraine and SAP’s resulting business shutdowns in Russia and Belarus in 2022 remain more significant for SAP than for other companies around the world.
Those these events had had serious economic impacts for SAP, we still believe that through the guidance and experience of its leadership team, SAP will be able to get through this environment and exit in a stronger business position.
Led by CEO Christian Klein, we believe that SAP’s executive team must continue its efforts to develop and secure new markets for its services and products as it works to replace some of its former clients and markets, even as the war rages and other macroeconomic conditions add difficulties. We continue to believe that SAP is up to the task.
SAP’s overall enterprise software and cloud product portfolio and business remains solid and is critical for many customers around the world. SAP adeptly found a better footing several years ago when it dove into cloud services and 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 is a backbone of businesses, large and small, in almost every industry around the world, making SAP a recurring revenue machine in terms of hundreds of thousands of customers that depend on SAP software and services to help run their businesses. This is one of the company’s greatest strengths as we continue to watch SAP’s continuing financial progress throughout 2023.
Disclosure: Futurum Research 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 Futurum Research 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.
