SAP Shares Slump After Cloud Backlog, Guidance Disappoint — 2nd Update

By Mauro Orru

SAP shares plunged after the German business-software group's cloud backlog and sales guidance disappointed investors.

The company behind the Concur travel and expense management platform said its current cloud backlog--a closely watched measure of sales SAP expects to recognize over the upcoming year based on existing contracts--grew 25% at constant currencies in the fourth quarter to 21.05 billion euros, equivalent to $25.17 billion. Investors had expected 26% growth. SAP said some revenue from large deals would move beyond this year, shaving off approximately 1 percentage point in growth.

Meanwhile, the company said it expects cloud revenue to grow between 23% and 25% at constant currencies this year to a range of 25.8 billion euros to 26.2 billion euros. The market had expected growth between 24% and 26% growth.

SAP shares fell 11% in early European trading, taking the stock down more than 30% over the past 12 months. Investors have punished stocks exposed to artificial intelligence in recent months after they started to question whether high AI spending is justified, fearing there is a market bubble waiting to burst.

Citi analysts wrote in a note to clients that SAP's fourth-quarter results might not be enough to clear a high bar as sentiment in the sector is subdued. However, SAP's fundamentals remain intact, they added.

SAP said it expects revenue growth to accelerate through 2027 as customers increasingly ditch software-support services in favor of the cloud.

Reporting on a non-IFRS basis, the group closed 2025 with total revenue of 36.80 billion euros, up 11% at constant currencies. In the fourth quarter alone, revenue grew 9% to 9.68 billion euros, with SAP's cloud business logging 26% growth in sales to 5.61 billion euros.

The company said its cloud business fared extremely well in Canada, Brazil, Germany, India, Italy, Spain, the U.K. and South Korea in the quarter, though sales were also strong in Australia, Japan, Mexico, Saudi Arabia, Singapore and the U.S.

In recent years, the company has been moving away from software-license sales in favor of subscription-based cloud services, a trend that SAP expects to continue.

The company said it would launch a new share repurchase program of up to 10 billion euros that is expected to start in February this year and close by the end of 2027.

The announcement comes after SAP reported a quarterly net profit of 1.89 billion euros, up from 1.63 billion euros a year earlier. Operating profit--a closely watched metric for software companies--increased to 2.83 billion euros from 2.44 billion euros, generating an operating margin of 29.2%.

Analysts had forecast quarterly total revenue of 9.70 billion euros, cloud revenue of 5.60 billion euros and an operating profit of nearly 2.74 billion euros on a 28.2% operating margin, according to a non-IFRS consensus provided by the company.

SAP, like other European software companies, presents its figures as two sets of numbers. One set is based on the International Financial Reporting Standards--an international accounting method that seeks to provide a global reporting standard--though analysts and investors tend to follow SAP's non-IFRS numbers, which exclude restructuring expenses and acquisition-related charges.

For 2026, SAP expects non-IFRS operating profit between 11.9 billion euros and 12.3 billion euros and free cash flow of roughly 10 billion euros.

Write to Mauro Orru at mauro.orru@wsj.com

(END) Dow Jones Newswires

January 29, 2026 04:19 ET (09:19 GMT)