SAP Shares Climb After Strong 4Q, Adjusted 2025 Targets

By Mauro Orru

SAP shares edged higher Wednesday after posting revenue and operating profit ahead of analysts' expectations for the fourth quarter and tweaked some 2025 targets to factor in recent accounting changes and the expected benefits of a new restructuring program.

At 0820 GMT, shares in the German business-software company traded 7.2% higher at EUR160.06. The stock is up some 15% since the year began.

Reporting on a non-IFRS basis, SAP said late Tuesday that total revenue climbed to 8.47 billion euros ($9.19 billion) from EUR8.06 billion in the fourth quarter of 2022. Revenue from SAP's cloud business jumped to EUR3.70 billion from EUR3.08 billion, while software-licenses revenue slipped to EUR841 million from EUR907 million.

Operating profit fell to EUR2.51 billion from EUR2.56 billion, with SAP's operating margin falling to 29.6% from 31.7%.

Analysts had forecast total revenue of EUR8.32 billion and cloud revenue of EUR3.72 billion on an operating profit of EUR2.47 billion and a 29.9% operating margin, according to a company-provided consensus on a non-IFRS basis.

For 2024, SAP expects non-IFRS operating profit at constant currencies between EUR7.6 billion and EUR7.9 billion, cloud revenue at constant currencies between EUR17 billion and EUR17.3 billion and free cash flow of roughly EUR3.5 billion.

SAP added that it plans to undertake a restructuring program this year that will affect some 8,000 jobs, ratcheting up its focus on artificial intelligence. Most of the costs related to the restructuring, currently estimated at about EUR2 billion, should be recognized in the first half of the year. Excluding restructuring expenses, the overhaul is expected to convey only a minor cost benefit this year.

The company tweaked some 2025 targets to reflect its fourth-quarter performance, the updated non-IFRS definition of profit measures, and the expected benefits from the new restructuring program.

By 2025, SAP now expects non-IFRS operating profit of roughly EUR10 billion, including share-based compensation expenses of approximately EUR2 billion, as opposed to about EUR11.5 billion previously, excluding share-based compensation expenses. Free cash flow should be approximately EUR8 billion, compared with around EUR7.5 billion previously.

Write to Mauro Orru at [e-mail]

(END) Dow Jones Newswires

January 24, 2024 03:41 ET (08:41 GMT)

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