SAP has confirmed its guidance for the year after a successful third quarter, which saw increased revenue and operating profit. The growth was primarily driven by the company’s core cloud business.
On a non-IFRS basis, the Germany-based software company reported that total revenue rose to €7.74 billion ($8.16 billion), up from €7.48 billion in the same quarter last year. Cloud revenue also experienced significant growth, increasing from €2.99 billion to €3.47 billion. However, software-licenses revenue fell from €406 million to €335 million.
SAP’s strategy involves shifting away from software-license sales in favor of subscription-based cloud services. This move is aimed at creating a more profitable and predictable business model based on recurring revenue.
“We accelerated cloud growth across our portfolio and significantly expanded our cloud gross margins,” stated Christian Klein, the Chief Executive of SAP.
The company highlighted exceptional cloud revenue growth in Brazil, India, and the Netherlands during the quarter. Additionally, Canada, China, France, Germany, Japan, and Switzerland also performed notably well.
Operating profit rose from €2.08 billion to €2.28 billion, with SAP’s operating margin increasing from 27.8% to 29.4%.
Analysts had predicted that total revenue would reach €7.73 billion, with cloud revenue at €3.53 billion, operating profit at €2.19 billion, and an operating margin of 28.4%, according to the company’s non-IFRS consensus.
SAP, like other European software companies, presents its figures in two sets: one based on the International Financial Reporting Standards (IFRS), and one on a non-IFRS basis. The latter is typically followed by analysts and investors as it excludes certain expenses such as share-based compensation and restructuring costs.
For the full year, SAP maintains its expectations of non-IFRS operating profit between €8.65 billion and €8.95 billion, and cloud revenue between €14 billion and €14.2 billion at constant currencies.