Earlier this year, SAP reported a promising start to 2021 during its first earnings call. In short, the first quarter of this year showed a lot of growth and promise, a trend that has continued into the second quarter of the year. Earlier this week, Christian Klein, CEO of SAP, was joined by Luka Mucic, CFO of SAP; Stefan Gruber, head of Investor Relations at SAP; and Scott Russell, leader of Customer Success at SAP to discuss the promising second quarter of 2021.

“For SAP, Q2 has been another fantastic quarter. It shows that we are executing well against the strategy we introduced last year. This strategy is playing out against the backdrop of every industry-transforming digitally and with more urgency than ever before,” Klein said. “Our customers are partnering with us as they transform their businesses while at the same time, modernizing the IT landscape with a move to the cloud. This is reflected in the strong quarterly results we announced today.”

The presentation focused on a few specific metrics, including the growth SAP is seeing including current cloud backlog (the contractually committed cloud revenue SAP anticipates to recognize in the next year), adoption of RISE with SAP and SAP S/4HANA Cloud, and the success of the SAP Business Technology Platform. Klein and Mucic also took time to discuss some of the newer SAP customers, the software company’s focus on sustainability, and how SAP is competing in the ERP market.

Here are some of the highlights from the Q2 2021 SAP earnings call.

Cloud Continues to Grow

Klein kicked off his portion of the presentation by discussing the continued growth SAP is seeing in the cloud. The current cloud backlog was up 20% at continuing cost to just under €7.8 billion. Meanwhile, cloud revenue also saw an accelerating in growth, increasing by four percentage points to 17%, totaling about €2.3 billion.

“This has been another excellent quarter. Our results demonstrate that our strategy is not just working, but creating distinct momentum in the market,” Klein said. “We are optimistic about reaching our goal of €22 billion in cloud revenue by 2025 with organic cloud growth of 22% per annum, growing twice the weight of our TAM (total addressable market).”

Mucic noted that the strong cloud growth acceleration is “backed by a strong performance in the [SAP] Business Technology Platform, Business Process Intelligence, Qualtrics, as well as customer experience.”

“The strong customer momentum and adoption that we saw in the quarter is very encouraging, which is also clearly reflected in our numbers,” Mucic said. “After an excellent first quarter, our cloud transition gained even more momentum in the second quarter with growth accelerating across our cloud portfolio.”

SAP S/4HANA Cloud and RISE with SAP Keep Rising

One of the most significant takeaways from the first quarter of the year was the early success of RISE with SAP, the subscription-based “business transformation as a service” offering SAP rolled out at the beginning of the year. This trend continued into the second quarter.

“We see strong demand from both, our installed base and from new customers, from companies of all sizes across industries and geographies and especially from our larger customers,” Klein said.

Klein noted that the strong momentum the organization is seeing leads to higher adoption rates of SAP S/HANA Cloud and the SAP Business Technology Platform. SAP reported continued growth with SAP S/4HANA Cloud, with backlog for that solution accelerating by 48% over the last year at continuing costs to €1.13 billion, a figure which Mucic attributed to SAP customers in the United States. Meanwhile, SAP S/4HANA Cloud revenue grew by 39% at continuing costs to €0.26 billion. Klein also noted that SAP has over 17,000 SAP S/4HANA customers, a figure which is up 16% year-over-year. Of that 17,000, about half those customers are net new.

Mucic noted that, as he indicated during the Q1 earnings call, software licenses revenue decreased. He attributed this to the fact that more customers are leveraging RISE with SAP as opposed to renewing software licenses, meaning that this is yet another indicated of the growth of RISE with SAP.

SAP and Sustainability

Another point of interest during the earnings call were the comments Klein and Mucic made about sustainability. This was one of the main focuses at the SAPPHIRE NOW 2021 keynote, with Klein and Julia White, chief marketing and solutions officer, discussing the software company’s sustainability portfolio and its goal to provide customers with tools to measure important metrics such as their carbon footprint. During the earnings call, Klein noted that 350,000 trading partners have joined the SAP Business Network—one of the components of RISE with SAP.

“With our sustainability portfolio, SAP is the only partner who can support companies on their entire journey across the full spectrum of sustainability, from carbon neutrality to social impact and economic progress,” Klein said.

Further on, Mucic mentioned a few of the “public commitments” SAP has to support sustainability, including joining the World Economic Forum stakeholder capitalism coalition, and becoming carbon neutral by the year 2023. Mucic reported that in the first half of 2021, SAP produced 45 kilotons of carbon emissions, a significant drop from 2020.

ASUG recently conducted research in collaboration with DSAG focused on cloud adoption and RISE with SAP. Register for our webinar on Aug. 2 at 9 a.m. CT, where we will unveil our findings and go over some highlights from that research.

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