SAP sees higher 2025 operating profit, as AI services catch on

By Ludwig Burger

(Reuters) - SAP, Europe's largest software maker, said on Tuesday it was more optimistic about its financial results this year due to faster growth in cloud computing and artificial intelligence.

The group said it expects operating profit in 2025, on a constant currency basis, to be between 10.3 billion euros and 10.6 billion euros ($10.75 billion-$11.06 billion).

SAP previously said its 2025 "ambition" was for operating profit of about 10.2 billion euros, total revenue of more than 37.5 billion euros and more than 21.5 billion euros in cloud revenue.

"Our strong position in data and Business AI gives us additional confidence that we will accelerate revenue growth through 2027." said CEO Christian Klein.

The group added that half of its fourth-quarter cloud order entry incorporated AI. In the previous quarter, it had seen a "significant" part of cloud deals including AI use cases.

Its AI offering includes a virtual copilot named Joule, which helps users to manage business tasks such as overseeing purchase orders.

"About 20,000 SAP developers are already using Joule for developers. What we are seeing is they can produce code faster – by 20%," Klein told journalists on a call.

The shares were little changed at 0845 GMT after initially gaining as much as 3.1%.

The company said it now expects cloud revenues to be slightly higher in a range of 21.6 billion euros to 21.9 billion euros for the year.

Fourth-quarter cloud revenue grew 27%, adjusted for currency effects, to 4.71 billion euros, beating an analyst consensus of 4.67 billion euros posted on the company's website.

The cloud and software revenue in the quarter grew 11% adjusted for currency effects, to 8.27 billion euros, beating an analyst consensus of 8 billion euros.

Quarterly operating income, adjusted for special items, gained 24% to 2.44 billion euros in the fourth quarter, above an analyst consensus of 2.25 billion euros.

The software maker has previously said up to 10,000 jobs out of its 100,000 total headcount were under review as it prepares for the era of AI, projecting restructuring costs of around 3 billion euros.

On Monday, SAP shares dropped alongside other European technology stocks after the popularity of a Chinese discount artificial-intelligence model wobbled investors' faith in the profitability of AI and related investments. ($1 = 0.9585 euros)

(Additional reporting by Harshita Meenaktshi; Editing by Savio D'Souza, Mrigank Dhaniwala and Louise Heavens)