SAP leadership announced first-quarter financial results for 2025, highlighting accelerated cloud revenue growth and a dramatic surge in operating profit that surpassed expectations, with CEO Christian Klein declaring that “our success formula is working” amid the German software leader’s strategic pivot toward cloud services and artificial intelligence.
Assessing the first-quarter performance, SAP leadership reported €9 billion in total revenue (up 12%), just under an anticipated €9.06 billion, and €4.9 billion in cloud revenue (up 27%), just shy of a projected €5.04 billion, with its current cloud backlog growing by 28%, to €18.2 billion. SAP also announced an operating profit of €2.45 billion, exceeding forecasts of €2.24 billion and marking a 60% rise from €1.53 billion in the same period last year.
The day following the April 22 announcement, earnings call, and investor teleconference, SAP shares rose as much as 11% in Frankfurt, marking the biggest intraday jump since April 24, 2019, and nearly 9.7% in U.S. trading. Adjusted earnings per share shot up to €1.44, a 79% year-over-year increase, outpacing consensus estimates of €1.32. The company's stock has risen 36% over this past year.
According to Klein, key growth drivers for SAP last quarter included cross-selling across the cloud portfolio via RISE with SAP, its initiative to move SAP’s large-enterprise installed-base customers to the cloud; the fusion of AI and business transformation tools to accelerate time-to-value; and GROW with SAP, its cloud ERP implementation initiative for net-new customers in the midmarket.
“With a share of more predictable revenue of 86%, SAP’s business model remains resilient in uncertain times,” said Klein in a statement accompanying the earnings. “Our AI-powered portfolio enables companies to navigate supply chain disruptions in over 130 countries and to unlock efficiencies with agility and speed.”
Amid global economic headwinds inflamed by U.S. tariffs, Klein stated that SAP is focused on delivering short-term value to customers whose IT budgets will be impacted by the on-going instability. SAP’s cloud ERP suite can help to insulate customers from such headwinds, enabling extended planning and analytics while improving supply chain resiliency via real-time trade management, financial modeling, and sourcing management capabilities.
But SAP is simultaneously seeking to accelerate time-to-value and reduce costs associated with implementing its business suite, including by improving its generative-AI copilot Joule’s ability to provide answers to technical and functional questions and equipping it with proprietary programming language ABAP. “These are not the days where you can come to a customer and lay down a several-hundred-million-dollar project without having also some instant value in the business case,” Klein said.
Key takeaways from the April 22 earnings call, investor teleconference, and Wall Street’s reaction:
- SAP reported a 28% increase in current cloud backlog, reaching €18.2 billion in the first quarter of 2025.
- Cloud revenue grew 27% year-on-year, with cloud ERP suite revenue increasing 34% and cloud gross profit increasing 31%.
- Operating profit surged by 60% in Q1, reaching €2.45 billion on the strength of SAP’s pivot to cloud services and artificial intelligence.
- Klein noted that half of the company’s cloud order entries now include AI components, signaling increased customer demand for AI services.
- Even amid economic turbulence and fears of a U.S. recession, about 86% of SAP’s sales last quarter stemmed from recurring revenue, reflecting the company’s ability to offset financial pressure from macro-economic disruption.
- SAP reaffirmed its full-year 2025 guidance, projecting annual operating profit between €10.3 billion and €10.6 billion, cloud revenues ranging from €21.6 billion to €21.9 billion, and free cash flow of approximately €8 billion.
- SAP will offer enhanced RISE with SAP packages including business transformation management solutions, Klein said, also noting that customers moving from private to public cloud will find it easier to do so with a “flexible cloud addendum” within their current contracts.
- The same day as the earnings call, SAP made available a new bundle for SAP S/4HANA Cloud, private edition, via RISE, and introduced the SAP Build low-code developer toolkit to both private and public cloud suites.
- Klein hailed SAP Business Data Cloud, announced in February, as “the new center of gravity for business data,” anticipating that it will become the no. 1 offering in the data analytics market on the strengths of SAP’s new partnership with Databricks.
Inside SAP’s Q1 2025 Earnings Results
“Current cloud backlog kept growing with a very high pace in Q1; cloud revenue continued to grow strongly even as the base has expanded,” Klein said on the April 22 earnings call and teleconference.
“Total revenue growth moved further into double-digit territory,” he added. “Operating profit, operating margin, and cloud gross margin performance have and will heavily benefit from our transformation program. And about half of our cloud order entry were deals that included AI use cases.”
Despite macro-economic headwinds, Klein signaled that SAP remains on track toward its 2025 outlook ranges, noting a “highly resilient business and financial model,” “excellent market position,” and “solid” sales pipeline for the remainder of the year. “No other tech company can offer a solution portfolio which is more relevant in times of new regulations, tariffs, and business uncertainty,” he added.
Klein noted that SAP’s globalization team works to localize SAP’s portfolio, including via solutions like SAP Global Trade Services Management, which enables customers to manage global transactions in real time and stay fully compliant in over 130 countries.
As customers plan their cloud migrations and seek to harness artificial intelligence (AI) functionalities for business, SAP is increasingly well-positioned to help its customers navigate instability in the global economy, from managing tariffs to gaining resiliency in supply chains.
With SAP Business Data Cloud, SAP’s Portfolio Grows More ‘Resilient, Relevant’
One core asset in SAP’s product portfolio is SAP Business Data Cloud, a new data solution intended to unify all SAP and third-party data throughout an organization while providing a trusted data foundation for business insights and artificial-intelligence applications. The solution, announced in February, brings together SAP Datasphere, SAP Analytics Cloud, and SAP Business Warehouse in a unified experience.
“BDC goes beyond SAP Datasphere by providing a semantic layer that unifies SAP and non-SAP data,” Klein told investors. “It enhances AI capabilities and offers significant value, leading to strong pipeline momentum.”
Harmonizing data from mission-critical applications into a semantic data layer via packaged data products derived from SAP solutions, as well as “insight applications” that leverage that data and harness AI models connected to real-time data sources to enrich it, SAP BDC will be particularly relevant to businesses navigating the complexity of real-time responses to evolving market conditions.
“To steer their companies through uncertain times, our customers can run real-time financial simulations based on internal and external data with SAP Business Data Cloud,” Klein told investors. “To adapt a company's business plan to new market realities, SAP Analytics Cloud and SAP Integrated Business Planning integrate—in real-time—sales, supply chain, HR, spend and financial planning with each other, to make cross-company decisions fast and in harmony. And finally, across our portfolio, embedded AI and Joule are boosting the productivity of a company to offset financial pressure.”
SAP Enables a Data Product Economy
Empowering decision-makers with such advanced planning and analytics capabilities could be a game-changer for global businesses navigating a volatile trade environment. SAP now seeks to create a new data-product economy around these SAP-derived products and additional insight applications; Klein teased that SAP is set to unveil more details on its collaborations with partners and customers to fuel development of such data products at the upcoming SAP Sapphire & ASUG Annual Conference.
Klein noted that SAP customers moving from on-premises SAP Business Warehouse (BW) instances would be particularly well-suited to SAP BDC. “These BW instances are very, very large—a lot of data—and similar often times to an ERP system,” he said. “If a customer is convinced to lift-and-shift those BW systems now to the cloud, what differentiates Business Data Cloud is the semantic layer; if they go that way, deal sizes can be pretty significant.”
SAP BDC gives SAP an advantage in the agentic-AI space by empowering AI-powered applications like Joule with business process knowledge and access to high-quality data, which it can then leverage across SAP’s fully integrated application suite to allow agents to cover end-to-end business processes.
“Net-net, this means SAP’s portfolio is highly relevant,” Klein told investors. “We can't change external uncertainty, but we can help our customers like no other company to manage those challenges, compliant with high agility and empowered by AI.”
Key Customer Wins Underscore SAP’s Business Value
In the fourth quarter of 2024, Robert Bosch and Schaeffler selected RISE with SAP for their cloud transformations, and MAHLE International went live on SAP S/4HANA Cloud; last quarter, that momentum continued, with Hyundai Motor Company, Kia Corporation, Mazda Motor, and automotive supplier Webasto Group all selecting RISE with SAP. Klein discussed this series of major deals in the automotive sector as indicative of SAP’s unique position to support customers navigating transformation in the current business environment.
“New business models and competitors are emerging, cost pressure is increasing, sustainability continues to be a challenge, and there is the need to adapt to a changing global trade system, including tariffs,” Klein told investors. “How does the industry deal with these challenges? As our customer wins indicate, auto companies rely on SAP's industry best practices, solutions and tools to transform their value chains by embracing the cloud and AI.”
Outside of the automotive sector, key RISE customer wins in Q1 included HUGO BOSS, Tyson Foods, Japan Railway, and the chemical group SYENSQO. Gymshark, Stegra, and VFS Global were among those businesses selecting GROW with SAP for midmarket. Additionally, Climeworks, HMM, LG Energy Solution, Lion, Nanometrics, and Samyang Foods went live on SAP S/4HANA Cloud in the first quarter.
Analysts Respond to SAP’s Q1 2025 Financial Results
In the analyst community, SAP’s financial earnings report was greeted positively, with the total cloud revenue and operating profit disclosures noted as encouraging signs for SAP customers amid macro-economic headwinds.
“One of the most important stories about SAP’s product line is that, if well-applied, it’s a bulwark against economic uncertainty,” stated Joshua Greenbaum, Principal at Enterprise Applications Consulting (EAC).
“Though it’s too early to see real impact on numbers through tariff issues, trade tensions and economic uncertainty, CEO Klein’s comments on this indicated that, so far, SAP isn’t seeing a big slowdown,” added Jon Reed, Co-Founder of Diginomica. “Instead, he is seeing the push for modernizing ERP and AI as positively impacting customer adoption.”
Added Reed: “SAP’s global footprint may give it some protection against a particular country’s headwinds. This could be a time where SAP’s localization capabilities across many markets could play well, as companies look into shifting supply chain investments or diversifying locations.”
Improving supply chain resiliency, regulatory compliance, and sourcing management “are precisely the things that SAP is really good at,” Greenbaum agreed. “This was a quarterly call about practical, real-world problems and practical, real-world solutions.”
With SAP BDC serving as a cornerstone of the earnings call and analyst teleconference, Greenbaum highlighted Klein’s assessment on the earnings call that the gross margin on this offering will be relatively small for SAP, given that, in Klein’s words, “Databricks gets a fair share of these deals.” That said, SAP BDC represents SAP’s most mature movement to date toward the concept of a data product economy; the company is well-positioned to benefit from a marketplace of data products—including insight apps and secondary products—around the platform.
As Klein explained during the analyst teleconference, introducing BDC and collaborating with Databricks requires SAP to share its data model in a way that deviates from its previous SAP BW approach of keeping that model proprietary. This new approach allows SAP to move closer to 360-degree visibility of a customer’s data—whether it’s housed in SAP solutions or third-party applications.
“It’s a potentially two-edged sword for SAP, opening up its data model, as this could make it easier for third parties to build insight app-like products based on this complete data view,” said Greenbaum, “but it’s also a value-add for BDC.”
The data product economy direction, Greenbaum assessed, could also introduce confusion for SAP customers who already run SAP Integrated Business Planning and solutions like Taulia, for working capital management, both of which offer similar functionality to insight apps that SAP has already unveiled.
“Two of those insight apps overlap with existing products and functionality that customers have already licensed,” assessed Greenbaum. “If SAP is looking to make money on these insight apps, it’s going to potentially come into conflict with customers who’ve bought Taulia and IBP, and who assume they’re going to get net-new functionality as part of their license, but who’ll need to purchase BDC and insight apps to get the functionality they thought they’d signed up for.”
Greenbaum praised SAP for acknowledging the importance of “driving quick wins” to customers within more expansive—and expensive—business cases for transformation.
“There was a recognition that SAP can’t just expect the customer to do a several-million-dollar project without also having some instant value in the business case,” he said. “It’s a healthy recognition that you have to have a stronger business case, to provide both long-range planning capabilities and short-term value to keep the momentum going.”
For his part, Reed is continuing to assess the impact of economic uncertainty, and the potential for a broader recession, on SAP’s customer base: “If customers do get ‘frozen in place’ due to uncertainty, or if they shift to shorter-term projects with more immediate impact than SAP platform transformations—such as AI point solutions designed for operational impact, like service/call center agents—that type of mindset could prove challenging for SAP at a time when many customers need to figure out their SAP ERP and S/4HANA modernization strategy—as well as how much of their innovation/software budget should go into big ERP vendors, however modern.”