TLDR
- Q1 revenue rose 11% year-on-year to €9 billion.
- Cloud revenue jumped 26%; ERP cloud suite surged 33%.
- Operating profit grew 58% to €2.5 billion (non-IFRS).
- Free cash flow increased 36% to €3.6 billion.
- SAP maintains strong backlog amid macro uncertainty.
SAP SE (NYSE: SAP) closed at $252.40 on April 22, up 0.74%, following its Q1 2025 earnings release. The German enterprise software leader reported strong top- and bottom-line growth, reflecting momentum in its cloud business and operational efficiency. Earnings per share came in at €1.52 (IFRS) and €1.44 (non-IFRS). The company’s next earnings date is July 22, 2025.
Cloud Growth Drives Top-Line Expansion
SAP’s total revenue rose 11% year-over-year to €9 billion. Cloud revenue soared 26% to represent the lion’s share of growth, driven largely by a 33% increase in the cloud ERP suite, which now accounts for 85% of total cloud revenue.
The company’s current cloud backlog hit €18.2 billion, reflecting a 29% increase at constant currency. SAP highlighted significant client wins across the automotive and public sectors, reinforcing its leadership in enterprise application software.
Profit Margins Expand Sharply
SAP reported a 58% increase in non-IFRS operating profit, reaching €2.5 billion. IFRS operating profit came in at €2.3 billion. Cloud gross margin improved by 2.6 percentage points to 75%, aided by efficiencies and scale in SAP’s cloud infrastructure.
Operating cash flow jumped 31% to €3.8 billion, while free cash flow grew 36% to €3.6 billion, a reflection of both margin gains and strong customer demand.
Solid Fundamentals Amid Macroeconomic Concerns
CEO Christian Klein emphasized SAP’s resilient business model, which features 86% predictable revenue. He noted the company’s AI-driven portfolio supports clients in managing supply chain volatility across 130+ countries.
Despite robust performance, SAP acknowledged macroeconomic and geopolitical challenges. Transactional cloud revenues dipped slightly due to slower ramp-ups and economic headwinds. The company also flagged risks tied to global trade policies and potential impacts on conversion rates.
Long-Term Performance Remains Strong
SAP stock has delivered a 43.43% return over the past year and a 157.53% return over the last three years, significantly outperforming Germany’s DAX Index. Year-to-date, SAP has returned 1.43%, lagging the DAX’s 9.90% rise.
With a forward dividend of $2.54 and a 1.01% yield, SAP continues to reward shareholders. The stock’s next ex-dividend date is May 13, 2025.
Outlook
SAP did not provide full-year guidance, citing macroeconomic uncertainty. However, strong cloud momentum, expanding margins, and rising free cash flow position the company well for continued growth. Investors are expected to focus on sustained cloud adoption and execution in upcoming quarters.
