SAP leadership announced third-quarter financial results for 2025 that showcased steady cloud growth and the increasing traction of its AI-first strategy — both key components of the company’s larger shift toward unifying core applications, data management, and AI capabilities within a more connected SAP Business Suite.
Assessing the second-quarter performance, SAP leadership reported €9.08 billion in total revenue (up 7%), driven by robust cloud growth and disciplined cost control. In the second quarter, cloud revenue was up 22% to €5.29 billion, while Cloud ERP Suite revenue grew 26% to €4.59 billion. Current cloud backlog, which refers to contractually committed cloud revenue SAP expects to recognize over the next 12 months, rose by 23% to €18.84 billion.
“SAP delivered a great Q3 with strong cloud revenue growth of 27% at constant currencies,” CEO Christian Klein said in an official statement. “We are gaining market share as our customers are adopting solutions across the entire Business Suite, including Business Data Cloud and AI at accelerated pace," he added. "For Q4 we are executing against a strong pipeline — which gives us confidence in our accelerating total revenue growth ambition for 2026.”
CFO Dominik Asam further pointed to profitability discipline and cash-flow control as proof of “agility amid uncertain macro conditions.” Despite strong growth in cloud revenue, cloud ERP suite revenue, and current cloud backlog, SAP missed analyst expectations in total revenue, delivering €9.08 billion as compared to a predicted €10.61 billion. This sent SAP shares down in after-hours trading, though the stock rebounded shortly thereafter; both Asam and Klein pointed to margin expansion and backlog growth as key indicators of long-term profitability via continued cloud momentum, despite the total revenue miss.
SAP reiterated its full-year cloud revenue ambition of €21.6-21.9 billion. SAP expects to end 2025 at the lower end of cloud revenue guidance and the upper end of operating profit (€10.3-10.6 billion). Free cash flow is forecast to exceed €8.2 billion, reflecting sustained profitability and cost discipline. Klein and Asam both reiterated confidence in accelerating total revenue growth through 2027, citing AI pipeline strength and cloud conversion momentum.
Key takeaways from the October 22 earnings call and investor teleconference:
- For the third quarter, ended Sept. 30. SAP reported total revenue of €9.08 billion, up 7% year-over-year. Cloud revenue climbed 22% to €5.29 billion, with the Cloud ERP Suite rising 26% to €4.59 billion — reflecting continued adoption of RISE and GROW with SAP packages across industries and regions.
- Current cloud backlog grew 23% to €18.8 billion, maintaining second-quarter momentum despite currency pressures.
- SAP CEO Christian Klein said the company “delivered a great Q3 with strong cloud revenue growth of 27 percent at constant currencies,” highlighting customer uptake of Business Data Cloud and new AI-driven capabilities as “accelerating across the entire Business Suite.”
- CFO Dominik Asam further pointed to profitability discipline and cash-flow control as proof of “agility amid uncertain macro conditions.”
- RISE and GROW remain at the center of SAP’s business model, with half of new cloud revenue coming from upsell and cross-sell into existing customers.
- Software licenses revenue were down 43%, a further indication of customer conversion via migrating to SAP S/4HANA Cloud toward multi-year subscription models, and away from one-time purchases of prior on-premises ERP licenses.
- Asam reaffirmed that SAP will “not trade price for volume,” indicating tighter margin discipline and pricing control from the company ahead. Customers should expect stricter discount policies but greater clarity on ROI-driven AI use cases.
- SAP gained market share, growing 10 percentage points faster than the rest of the market in 2024, according to an IDC study cited by Klein.
- SAP adjusted its cloud revenue outlook for fiscal year 2025 towards the lower end of expectations on account of delayed bookings in the first half of the year in industrial manufacturing and the public sector, though these back-end-loaded bookings should lead to robust Q4 conversion and further acceleration in 2026.
- The company finalized its acquisition of SmartRecruiters and expanded AI and data partnerships with ADP, OpenAI, and AWS, highlighting SAP’s commitment to enterprise-grade AI through its Business AI and Joule assistants.
Inside SAP's Q3 2025 Financial Results
On the Q3 earnings call, Klein struck an optimistic tone:
“SAP had a great Q3. Our cloud revenue growth and current cloud backlog performance have been strong. Business in the U.S. public sector has started to pick up again, and we’re gaining market share as customers adopt Business Data Cloud and AI across the suite.”
Stating that AI is "becoming the key enabler of our course," Klein stated that SAP grew “10 percentage points faster than the market in 2024" and further highlighted SAP's continuing investment in AI agents that automate core business processes, from supply chain planning to procurement, as well as AI assistants for specific personas that will roll out across the fourth quarter and in 2026.
The financial results come on the heels of SAP Connect, a conference at which SAP further delineated its shift in focus from discrete AI agents to orchestrated agents that will be embedded in end-to-end processes and overseen by role-aware AI assistants, in addition to announcing partnerships with Perplexity (for SAP and non-SAP data retrieval) and Google (via SAP Business Data Cloud Connect, establishing a zero-copy and bidirectional data pipeline between SAP BDC and Google BigQuery).
"Only the combination of LLMs with business process and contextual data results in high-value AI use cases," Klein stated. "That is our strategy. That is where SAP is better than anyone else, and that is where we innovate and invest. We are proud of releasing more and more AI agents."
SAP aims to compete not through infrastructure scale but through delivering value, Klein said. "Our strategy focuses on value creation at the upper part of the stack, not on building data centers," he told analysts. "We leverage partnerships for infrastructure needs and focus on delivering high-value AI use cases."
SAP’s third-quarter momentum remained driven by RISE with SAP and the company's broader cloud ERP portfolio. High-profile wins included Alphabet, Ericsson, Lufthansa, The Magnum Ice Cream Company, STIHL, Syngenta Crop Protection, and Tapestry; in addition to selecting RISE, many of these companies adopted SAP Business Data Cloud and business-AI solutions, deepening their SAP footprint through cloud transformation.
BMW and Nestlé, meanwhile, went live on S/4HANA Cloud. The quarter also saw SAP finalize its SmartRecruiters acquisition and expand partnerships with OpenAI in the German public sector, AWS around SAP sovereign cloud, Google Gemini to embed AI agents across core processes, and ADP to run global payroll in the cloud.
As stated by Klein, with growing business in the U.S. public sector, SAP National Security Services (SAP NS2) secured a major framework contract with the U.S. government, which has already led to the awarding of a $1 billion contract with the U.S. Army for RISE with SAP, running through September of 2035 and "enabling migration from on-premise systems to SAP’s NS2’s FedRAMP-authorized cloud platform."
Guidance for 2025 was slightly adjusted, with SAP now expecting cloud revenue toward the lower end of €21.6-21.9 billion on account of "stalled pipeline" in the first half of the year, non-IFRS operating profit toward the upper end of €10.3–€10.6 billion, and free cash flow of €8.0–€8.2 billion (clarified from a previously stated "around €8.0 billion" estimate).
Analysts Respond to the Q3 2025 Financial Results
"SAP took a small Wall Street hit after missing investor expectations, but not by a lot," Reed assessed. "Overall, it appears that SAP's cloud revenue growth, up 27% to $6.3 billion—which marks the fifth quarter in a row that cloud growth is up more than 25%—is clearly a core number that is keeping market prices solid."
Much of this cloud ERP revenue is associated with RISE in the private cloud, as distinct from public cloud ERP, which indicates that SAP is effectively managing the journey for private-cloud customers and "able to ensure those customers continue to progress towards more standard deployments via so-called 'clean core' initiatives," Reed said.
"Klein is also making the case that SAP's AI strategy is driving SAP's forward movement," explained Reed, though he noted that it's currently difficult to directly assess the impact of AI on revenue given that AI revenues are not reported separately.
While Klein noted that more AI agents will be debuted in the coming months, he also stated that it's not the number of AI agents that counts. Instead, "it's about how we automate and infuse intelligence across end-to-end business applications," Klein stated — and Reed strongly agreed with this distinction.
"SAP is one of only a handful of ERP vendors that can layer AI agents onto end-to-end processes or utilize them in agentic flows," he stated. "This matters because, right now, agent-to-agent communication is a big challenge — and at best is a work in progress."
Larger cloud migration journeys can support SAP's business-AI ambitions, he noted. Still, SAP must continue to work to prove that AI is a differentiating factor in building business cases and accelerating overall customer adoption.