How SaaSpocalypse fears actually bolstered SAP profits by over $150 million

By Steve Goldstein

SAP CEO Christian Klein presided over a quarter in which cloud revenue and backlog both grew rapidly.

For one software giant, the fear that artificial intelligence will render their products obsolete has a silver lining.

SAP's chief financial officer, Dominik Asam, pointed out that the German software giant's steep share-price decline in the first quarter saved it some EUR135 million ($158 million) in compensation.

"The SaaSpocalypse debate and the related 28% decline in our share price during the first quarter alone left its traces in that position," said Asam in a Thursday night call with analysts, according to a FactSet transcript.

"While we hedge the lion's share of our cash-settled grants, the sheer magnitude of the move in the unhedged portion, in combination with related social charges that are not hedged, provided this, I have to admit, unintended relief, adding to continued strong general cost discipline."

SaaSpocalypse is the portmanteau combining the acronym for software-as-a-service, SaaS, with apocalypse. The iShares Expanded Tech-Software ETF IGV, at its lows, has fallen as much as 29% this year on those fears.

SAP stock (SAP) (XE:SAP) rallied 6% in Frankfurt trade as the competitor to Oracle reported 27% growth in cloud revenue and 25% growth in its cloud backlog, both in constant currencies, in the first quarter. The stock however is still down 29% this year.

"This is clearly encouraging and pointing to sustained healthy demand momentum for SAP's solutions," said Deutsche Bank analysts of the first-quarter numbers.

SAP says that AI is going to help its business, pointing out examples such as Daimler Truck using an SAP AI product to improve the win rate with customers and the Queensland, Australian government using it to predict road surface issues across 33,000 kilometers. But CEO Christian Klein did acknowledge that some of the complex AI tasks are only 85% to 90% accurate.

"Is this enough when you are touching the payroll, the finance, the financial close, the supply chains of a customer? No, it's not enough. It's not that the customers don't see the value. They see the value. But we have to go the last mile," he said.

-Steve Goldstein

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04-24-26 0514ET