January 28, 2020
![SAP headquarters in Walldorf, Germany, 2013 SAP headquarters in Walldorf, Germany, 2013](https://eu-images.contentstack.com/v3/assets/blt8eb3cdfc1fce5194/bltc68be452d0f86473/6621160fae9fb2ded8bdfd7b/sap_20headquarters_20walldorf_202013_20getty_0.jpg?width=1280&auto=webp&quality=95&format=jpg&disable=upscale)
Sarah Syed (Bloomberg) -- SAP SE raised its outlook for adjusted operating profit but cloud revenue forecasts wavered, as the software giant’s new chief executive officers’ plot how to compete with U.S. rivals.
Europe’s biggest tech company by market value has spent the past few years concentrating on growing its cloud business.
However SAP’s fourth-quarter results were “mixed,” analysts at MainFirst said, adding that while licenses and operating margins were ahead of predictions, cloud revenues came in below expectations.
The company’s shares fell as much as 2.7% in early trading Tuesday.
The results mark the first full quarter under co-CEOs Christian Klein and Jennifer Morgan, after chief Bill McDermott stepped down in October after 10 years at the helm.
McDermott spent $26 billion on six major cloud acquisitions and was the main advocate for the $8 billion acquisition of cloud-software company Qualtrics International Inc., the company’s largest-ever deal.
Klein and Morgan must find ways to compete with younger companies like Salesforce.com Inc. and Workday Inc. while encumbered by a traditional enterprise software business.
SAP reported a 25% increase in new cloud bookings to 2.27 billion euros ($2.5 billion) for 2019, but reduced its guidance for 2020 cloud revenue growth, while the mid-point of operating-profit growth was below prior guidance.
Over the fourth quarter, revenue at the Qualtrics business hit 156 million euros.
One of SAP’s biggest customers moved a large chunk of its business to the cloud, which contributed 10 percentage points to the total new cloud-bookings growth of 19%. This suggests that new growth, excluding this contribution, was in high single digits, analysts at MainFirst said.
Lower growth in the high-margin cloud business is also likely to weigh on the company’s overall profitability, Jefferies analyst Julian Serafini said in a note on Tuesday.
SAP lifted its estimates for adjusted operating profits to 8.9 billion euros to 9.3 billion euros, from 8.8 billion euros to 9.1 billion euros. That compares with an average analyst estimate of 8.82 billion euros, according to estimates compiled by Bloomberg.
“We are running our business at a global scale quite resilient against any kind of geopolitical tensions and trade sanctions in the world,” Klein said in an interview with Bloomberg TV Tuesday.
For the fourth quarter, SAP reported adjusted operating profit rose 12% to 2.84 billion euros, compared with an estimate of 2.85 billion euros. Revenue rose 8.3% to 8.05 billion euros, compared with estimates of 8.09 billion euros.
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