Call­ing 2022’s sec­ond-quar­ter per­for­mance ​“strong,” SAP lead­er­ship report­ed €7.517 bil­lion in over­all rev­enue, up 13%, and €3.056 bil­lion in cloud rev­enue, up 34%, mak­ing cloud the lead­ing rev­enue source for the first time.

Addi­tion­al data points for the quar­ter end­ed June 30 includ­ed: total cloud and soft­ware rev­enue of €6.459 bil­lion; €10.403 bil­lion in cur­rent cloud back­log, up 34%; SAP S/4HANA rev­enue of €472 mil­lion, an 84% increase; and S/4HANA cur­rent cloud back­log at €2.258 bil­lion for a 100% jump.

While SAP report­ed some pos­i­tive prof­it num­bers, such as a 39% increase in cloud gross prof­it, over­all oper­at­ing prof­its declined. SAP Inter­na­tion­al Finan­cial Report­ing Stan­dard (IFRS) oper­at­ing prof­it was down 32%, to €673 mil­lion, and its non-IFRS prof­it was down 13%, to €1.68 bil­lion. In pub­lished remarks, the com­pa­ny attrib­uted the decreas­es to ​“reduced con­tri­bu­tion from soft­ware licens­es rev­enue” and ​“sig­nif­i­cant bad debt expens­es relat­ed to the war in Ukraine.” Ear­li­er this year, SAP announced its com­plete exit from busi­ness in Russia,

Inte­gra­tion Focus

Dur­ing the finan­cial report ses­sion, Chris­t­ian Klein, SAP CEO, said, ​“Cus­tomers are choos­ing us for the pow­er of our inte­grat­ed port­fo­lio. First, core ERP; sec­ond, the SAP busi­ness tech­nol­o­gy plat­form (BTP); and third, our best-in-class solu­tions. Our strat­e­gy is focused on invest­ing in and cap­i­tal­iz­ing on the inte­gra­tion of these assets.” 

He not­ed BTP’s run rate exceeds €1.4 bil­lion, with more than 14,000 on the plat­form, and ​“around” 20,000 cus­tomers on S/4HANA; and for S/4HANA Cloud ​“approx­i­mate­ly” 6,000 cus­tomers and over 600 wins in Q2. Fur­ther, he cit­ed improved per­for­mance in the company’s Intel­li­gent Spend and Busi­ness Net­works, Sig­navio, and Cus­tomer Expe­ri­ence port­fo­lios, and in its sus­tain­abil­i­ty solu­tions ​“giv­en the ener­gy crisis.”

Look­ing ahead, Klein said the com­pa­ny antic­i­pates con­tin­ued momen­tum behind a Cap­i­tal-Expense-to-Oper­at­ing-Expense spend shift and the ​“faster than expect­ed” shift to cloud, includ­ing RISE with SAP adoption.

Echo­ing Klein’s pos­i­tive yet mea­sured remarks on the over­all ​“strong” and ​“good” quar­ter, Luca Mucic, CFO, not­ed the ​“par­tic­u­lar­ly strong per­for­mance” of cloud tran­si­tions among U.S. cus­tomers; sol­id pipeline-to-closed sales across the Amer­i­c­as; and plans to increase SAP invest­ment in next-gen­er­a­tion cloud deliv­ery platform.

Mucic also described SAP progress as a sus­tain­abil­i­ty ​“enabler and exem­plar.” He cit­ed inno­va­tions in the SAP Cloud for Sus­tain­able enter­prise, the pre­vi­ous­ly announced Tau­lia-Eco­Vadis part­ner­ship, and a 28.8% increase for women in SAP man­age­ment roles. 

Expert Ana­lysts’ Observations

Dun­can Jones, VP and Prin­ci­pal Ana­lyst at For­rester, con­tin­ued his com­men­tary focused on the SAP core prod­uct port­fo­lio strength. 

“It will be good news for SAP cus­tomers if SAP ratio­nal­izes its port­fo­lio and focus­es on its HANA and S4/HANA oppor­tu­ni­ties,” Jones said, adding that the ​“weak € means SAP can afford to dis­count more, and tough trad­ing con­di­tions means that sales teams will be very keen to get deals”

Joshua Green­baum, Prin­ci­pal at Enter­prise Appli­ca­tions Con­sult­ing, also char­ac­ter­ized the peri­od as ​“a good quar­ter, con­sid­er­ing SAP was fac­ing the impact of its with­draw­al from the Rus­sia mar­ket and the loom­ing reces­sion.” He pre­dict­ed con­tin­ued momen­tum, giv­en ​“the abil­i­ty of SAP to offer a num­ber of solu­tions that can help ROI and pro­duc­tiv­i­ty in reces­sion­ary times.”

He called the cloud rev­enue mile­stone ​“a major inflec­tion point,” adding ​“the abil­i­ty of RISE with SAP to gen­er­ate add-on sales is also impor­tant: the kinds of dig­i­tal trans­for­ma­tion that RISE is designed for require on-going inno­va­tion, not just one-off projects.” 

Green­baum was curi­ous about the BTP results, giv­en that ​“a lot of those sales were for indi­vid­ual com­po­nents of BTP and not nec­es­sar­i­ly reflec­tive of the suc­cess of BTP as a bun­dled set of tools. SAP still has a lot of work to do to make the BTP brand and its val­ue well-under­stood by its customers.”

In his #Cloud­Wars minute last week, Cloud­Wars founder Bob Evans, who will give a keynote address at ASUG Best Prac­tices: SAP for Cloud in August, also not­ed the SAP report of 40% BTP growth among the ​“pow­er­ful set of num­bers of Q2.” In the cloud are­na, Evans said, ​“SAP has a good chance to grow faster than Google Cloud and Ora­cle,” hav­ing come on par­tic­u­lar­ly strong in the last year.

And Fabio Di Capua, Gart­ner VP and Ana­lyst, Tech Prod­uct Man­ag­er, not­ed that the Q2 results of more than 650 new SAP S/4HANA sales bring­ing the total S/4HANA sales close to 20,000 and made for the best sec­ond-quar­ter per­for­mance since the S/4HANA introduction.

Yet, he added, ​“The road to the end of ECC sup­port in ²⁰²⁷⁄₂₀₃₀ con­tin­ues to be com­pli­cat­ed, as exist­ing cus­tomers are strug­gling to define the busi­ness case for migra­tion to S/4HANA and the move from per­pet­u­al licens­es to sub­scrip­tion. Gart­ner esti­mates around 16,000 exist­ing SAP cus­tomers still need to acquire and imple­ment S/4HANA.”