Software SAP expects higher operating profit despite economic downturn

Europe's largest software manufacturer SAP earned significantly more in the third quarter despite the tense economic situation in many regions. This is shown by the latest quarterly figures. The outlook is also positive.

CEO Christian Klein is aiming for more in terms of both sales and operating profit. SAP is making less progress than expected with the planned new hires in the ongoing major restructuring of the workforce. Because SAP is cutting thousands of jobs at the same time, this has benefited the result. As did the comparatively lucrative software license business, which shrank less than expected.

In the three months from July to September, earnings before interest and taxes adjusted for special effects climbed unexpectedly sharply by 27 percent year-on-year to 2.24 billion euros, as the DAX heavyweight announced late on Monday evening after the US stock exchange closed. SAP is now aiming for a currency-adjusted increase of 20 to 23 percent in this much-noticed key figure in 2024. Previously, 17 to 21 percent growth was planned.

Focus on cloud software

The Walldorf-based company is also aiming for more in terms of total product sales. Adjusted for currency effects, this is set to grow by 10 to 11 percent instead of just 8 to 10 percent. The key factor here is also the license business, which is currently proving more robust than expected. Klein is actually focusing fully on cloud software, which is expected to bring benefits in terms of customer loyalty and therefore also in terms of turnover and profit over several years with ongoing subscription fees.

The cloud software itself remains on target. Sales of cloud offerings increased by a quarter in the third quarter, and bookings for the next twelve months also continued to rise noticeably. Overall, Group turnover climbed by 9 percent to 8.47 billion euros, while net profit was 13 percent higher than a year earlier at 1.44 billion euros.

Number of employees likely to increase

Chief Financial Officer Dominik Asam made it clear in a telephone conference that the Group intends to accelerate the pace of recruitment in the fourth quarter. The restructuring program announced at the beginning of the year and further intensified in the summer provides for the elimination of up to 10,000 existing positions within the Group. Many employees will be able to apply for new positions within the Group, but a large number will also leave the Group. However, new hires and the recent billion-euro acquisition of the Israeli software specialist WalkMe should even increase the number of employees slightly by the end of the year.

From next year, SAP intends to significantly reduce costs through the program, which is currently expected to save around 700 million euros. SAP has already booked 2.8 billion in costs this year for severance payments, among other things, and this figure is expected to rise to around 3 billion by the end of the year.

SDA