SAP (SAPG.DE) said demand for its cloud-based business database had grown as the German company confirmed its preliminary results and guidance for the current year, boosted by large returns from venture capital investments.
Just last week, the company forecasted growth in cloud revenue of 16-19% for the whole year, contributing to the overall growth of 2%-4% for cloud and software revenue.
In contrast to its earlier forecast of unchanged to down 4% for the operating profit, the company now expects it to be flat to down 2%.
As SAP moves from perpetual software licenses to subscription-based cloud services, it launched Rise with SAP in January, an all-in-one solution for digital transformation.
CEO Christian Klein stated that our applications and platform had seen record adoption. As a result, cloud adoption has accelerated substantially.
According to SAP, cloud and software revenue for the full year will reach 23.8 billion-24.2 billion euros, increasing 200 million euros.
During the third quarter, the backlog for S/4HANA, our flagship database, increased by 58% at constant currencies, and the current backlog of cloud services grew by 22%.
During the third quarter ended September 30, the company reported a revenue increase of 5% to 6.68 billion euros ($7.70 billion). SAP will release its full results on October 21.
Another profitable venture capital company, Sapphire Ventures, contributed 2% of adjusted earnings per share to 1.74 euros.
In the third quarter results, the backlog of cloud projects for SAP’s flagship database S/4HANA increased by 58% at constant currency rates, and the current backlog of cloud projects grew by 22%.
According to Chief Financial Officer Luka Mucic, cloud revenue now represents 35% of total revenue and is driving growth in our predictable revenue segment, which increased by three percentage points year over year to 77%.
Nevertheless, shares of the software maker fell 3.4% to the bottom of Frankfurt’s blue-chip index after Mucic made an earnings call with analysts in which he confirmed the group’s outlook for flat or slightly lower profits in 2022.
It is possible that the markets now have other options if this was thought to be the EU technology play for 2022, a trader commented.
SAP still expects to generate revenues from cloud and software of 23.8 billion-22.42 billion euros for the full year, increasing by 200 million euros ($232 million).
A higher adjusted revenue of 6.68 billion euros ($7.70 billion) and an increase in adjusted earnings per share of 1.74 euros were reported for the third quarter ended September 30.
SAP’s venture capital arm, Sapphire Ventures, was also a major contributor to the organization’s third-quarter results, which accounted for a quarter of the company’s more than two billion-euro profit. This highlights the fund’s recent success in backing small technology startups.
According to some analysts, they do not consider the fund’s performance in their forecasts, instead of focusing on the more predictable results of its cloud service.
But year-to-date, the business has generated about 1.8 billion euros, an increase of one billion from last year, Mucic told journalists in a conference call.
According to Andreas Weiskam, co-founder and partner of Sapphire Ventures, we typically write checks ranging from $10 to $60 million, but we can reach up to $100 million.
Its assets under management currently account for more than $6.8 billion, according to Weiskam. This represents a commitment of $1.75 billion by SAP last quarter. According to Knut Woller at brokerage Baader Helvea, SAP Ventures delivers a tailwind, but it also means volatility – depending on the capital markets.