SAP 2Q Operating Profit Takes Hit From Ukraine War

By Mauro Orru

SAP SE on Thursday posted higher revenue for the second quarter as its cloud business continued to grow, but the war in Ukraine harmed operating profit, prompting the German business-software giant to lower its forecast for the year.

Reporting on a non-IFRS basis, SAP said operating profit slipped to 1.68 billion euros ($1.71 billion) from EUR1.92 billion, with its operating margin down to 22.4% from 28.8%. Analysts polled by FactSet had forecast operating profit of EUR1.74 billion.

SAP blamed lower software-licenses revenue and bad debt expenses linked to the war in Ukraine for the decline, saying it expects a hit of roughly EUR350 million to operating profit at constant currencies for the year.

As a result, SAP lowered its forecast for the year and now expects non-IFRS operating profit at constant currencies between EUR7.6 billion and EUR7.9 billion, rather than between EUR7.8 billion and EUR8.25 billion.

Total revenue for the second quarter climbed to EUR7.52 billion from EUR6.67 billion, with cloud revenue up to EUR3.06 billion from EUR2.28 billion. Software-licenses revenue fell to EUR426 million from EUR650 million.

SAP is pivoting away from software-licenses sales, once its biggest revenue stream, to subscription-based cloud services, banking on a more profitable and predictable model based on recurring revenue.

Analysts polled by FactSet had forecast total revenue of EUR7.43 billion, and cloud revenue of EUR3 billion.

For the year, SAP continues to expect cloud revenue at constant currencies between EUR11.55 billion and EUR11.85 billion.

Write to Mauro Orru at [e-mail]; @MauroOrru94

(END) Dow Jones Newswires

July 21, 2022 01:32 ET (05:32 GMT)

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