SAP leadership announced fourth-quarter and full-year financial results for 2024, with CEO Christian Klein telling investors that SAP has “exceeded our cloud goals, accelerating cloud revenue and current cloud backlog growth,” even as rapid growth in cloud computing and artificial intelligence fuels his optimism that 2025 will yield even higher operating profit.
Assessing the fourth-quarter performance, SAP leadership reported €9.38 billion (or U.S. $9.72 billion) in total revenue, up 11%, and €4.7 billion ($4.87 billion) in cloud revenue, up 27%, with current cloud backlog growing by 29%, to €18.1 billion ($18.75 billion). Operating profit for the quarter rose to €2.44 billion ($2.53 billion), while the share of more predictable revenue increased by 4% to 81%. The full year saw €34.18 billion ($35.41 billion) in total revenue, up 10%, and €17.14 billion ($17.76 billion) in cloud revenue, up 26%. Total cloud backlog currently stands at €63.3 billion ($65.58 billion), up 40%, which Klein declared “a new record high.”
The fourth-quarter financial results, which surpassed Wall Street’s expectations, led SAP to raise its full-year operating profit forecast; last estimated at €10 billion ($10.36 billion), the company now anticipates 2025 operating profit to be between €10.3 and €10.6 billion ($10.67 and $10.98 billion).
“Q4 was a strong finish to the year, with half of our cloud order entry including AI,” Klein said in a statement. “Looking ahead, our strong position in data and Business AI gives us additional confidence that we will accelerate revenue growth through 2027.”
Key takeaways from the Jan. 28 earnings call, investor teleconference, and Wall Street’s reaction:
- SAP’s Q4 cloud momentum included a 29% increase in current cloud backlog and a 27% rise in cloud revenue, driving double-digit total revenue growth for a third consecutive quarter, with cloud and software revenue additionally up 11%.
- SAP updated its 2025 ambition, with a non-IFRS operating profit ambition between €10.3 billion and €10.6 billion, with Klein stating that he expects accelerating cloud revenue growth next year.
- SAP will not shift its standard and extended maintenance deadlines for SAP ECC customers, but Klein confirmed plans for an additional transition option that will benefit large-enterprise RISE customers navigating complex transformations by providing business continuity support services through the end of 2033.
- SAP is expanding its Executive Board with a Strategy & Operations board area, to be led by newly appointed Chief Operating Officer Sebastian Steinhaeuser, and the appointment of co-Chief Revenue Officers Jan Gilg and Emmanuel Raptopoulos.
- AI is increasingly a key business driver for SAP, with AI embedded in 50% of Q4 deals.
- SAP leadership expressed optimism at DeepSeek’s development of cost-effective AI models, given that its AI Hub is well-positioned to capitalize on innovations in the area of large language models (LLMs) such as those announced by the Chinese tech startup.
- Among the customers who selected RISE with SAP in Q4: BP International, Chevron Corporation, Ford Motor Company, Red Bull, Robert Bosch, The South Carolina Department of Administration, and Colgate-Palmolive.
- Among the customers who selected GROW with SAP in Q4: Databricks, Inetum, Outreach, ACTUM Digital, CiboVita. Medical University of Vienna, and Warrington Borough Council.
- Among the customers who went live on SAP S/4HANA Cloud in Q4: Coles Group, General Motors, H.B. Fuller, Hyundai Glovis.
- SAP reported fourth-quarter earnings of €1.40 ($1.46) a share on revenue of €9.38 billion; following the publication of SAP’s financial results, shares of SAP SE were up 2% premarket on Wednesday.
Inside the Cloud-Centric Financial Results
SAP expects its cloud revenue growth to accelerate in 2025, as more of its on-premises customers upgrade to SAP S/4HANA Cloud. The company capped off 2024 with a strong quarter in which, per Klein, “we achieved all our cloud goals despite macro headwinds and the ongoing transformation inside SAP.”
In the earnings call and subsequent teleconference, Klein reflected on the rapid growth of SAP’s cloud business, calling the financial results indicative of “how far we have come” as a company.
“Four years ago, SAP shares took a hit when we announced our plan to transform the company,” he told investors. “The markets had some serious doubt if we could pull it off, but we did it, and we delivered on all of our strategic promises. We more than doubled cloud revenue since 2020 and raised it to half of SAP's total revenue today. No major competitor is growing as fast as SAP. And with a total cloud backlog of €63 billion and an 83% recurring revenue share, we are on a more resilient growth path than ever.”
As SAP’s installed base, many shifting from on-premises ERP to the cloud, continues to move toward SAP S/4HANA, Klein stated during the analyst teleconference that 40% are opting for RISE with SAP. Recent ASUG research indicates that significantly more SAP users than that (59%) plan to utilize RISE in the near future or are currently considering it for future use in shifting to the private cloud. Since the RISE offering’s introduction in early 2021, its evolution into a more flexible, comprehensive methodology providing best practices for cloud ERP deployment has been a center point of SAP’s cloud strategy.
That other SAP customers have not yet made the shift, despite standard maintenance deadlines fast-approaching in 2027, will ensure a continuous maintenance revenue stream for SAP as those customers move into extended maintenance, Klein told Wall Street analysts, while still giving SAP the chance to support their cloud migrations in future years.
SAP Details Additional ERP Transition Support Option
Though maintenance support for SAP ECC on-premises solutions will still come to an end in 2027, followed by the end of extended services in 2030, SAP plans to help its large enterprise customers to ensure business continuity throughout transition by giving those migrating to the cloud via RISE the option to keep using their previous systems until the end of 2033.
As first reported by German business newspaper Handelsblatt and confirmed by SAP, this option—which Handelsblatt called an “SAP ERP, private edition, transition option”—will be further detailed in the first half of 2025.
Klein said that SAP “will stick to” its 2027 mainstream-maintenance deadline but is extending this option to larger SAP customers who must navigate substantial complexity in transforming and consolidating extensive ERP instances and business processes.
“Some of our customers have over 100 ERPs; they are running factories, manufacturing, and logistics,” Klein said. These customers might not be able to completely transform by 2030, but this option is “reaching out with a helping hand” to facilitate their journeys. Later in the teleconference, Klein clarified that this transition option, though designed to serve “a few very large customers,” will be available to all customers.
“You also have to consider, in some parts of the stack, there are third-party components included, and they are running out of maintenance as well,” Klein added. “We don’t want to leave the customers behind. And as we’ve moved all of our cloud solutions already onto HANA Cloud, we’ll now do the same with these on-premise customers; we move them to the cloud, we replace the third-party components and, with that, we can also run in the cloud their 100 ERPs, in a completely sustainable and supported way.”
Prior to SAP introducing its HANA database in 2010, SAP software was often instead deployed on third-party databases like Oracle, Microsoft SQL Server, and DB2. Given that SAP S/4HANA only runs on SAP HANA database, moving ECC customers onto the database is an important component of supporting their migrations; this new transition option, as detailed by Klein, addresses the impending de-support of third-party assets, such as databases, and could protect large-enterprise RISE customers from outages.
SAP Announces Key Leadership Shifts
Outside of highlighting the company’s strong financial performance, SAP also used the earnings call and teleconference to announce a series of leadership shifts. Following the exits last year of SAP Chief Marketing and Strategy Officer Julia White, Chief Revenue Officer Scott Russell, and Chief Technology Officer Juergen Mueller, all members of the SAP Executive Board, SAP is introducing a new board area and restructuring its leadership with several high-profile appointments.
First, SAP is creating a new Strategy and Operations board area, to be led by Sebastian Steinhaeuser, who will serve as SAP’s Chief Operating Officer, effective Feb. 1. Previously the company’s Chief Strategy Officer, Steinhaeuser will also join the SAP Executive Board in this new role. Meanwhile, SAP Executive Board Member Thomas Saueressig, who heads the Customer Services & Delivery board area, had his contract extended three years, until 2028. And Philipp Herzig has been appointed as SAP’s new global CTO, while retaining his current role as Chief AI Officer.
Elsewhere, Jan Gilg, currently president and chief product officer for Cloud ERP, and Emmanuel Raptopoulos, currently regional president of SAP EMEA, will jointly lead the SAP Customer Success organization as co-Chief Revenue Officers (CROs), with Gilg overseeing SAP Americas and the Global SAP Business Suite and Raptopoulos managing the SAP EMEA, MEE, and APAC regions.
Read ASUG's recent interviews with Jan Gilg on extensibility, clean core, the evolution of the enterprise-architect role, and the potential of generative AI.
SAP Furthers Embrace of Business AI
SAP delivered more than 1300 generative-AI use cases in 2024, according to Klein, which exceeded the company’s initial targets while laying the groundwork for a further “doubling down on AI in 2025.” This, in turn, will be fueled by more than 30,000 developers working within SAP to build new use cases and strengthen the company’s AI foundation. “One key ambition is to make a tool user 30% more efficient by the end of 2025,” Klein added.
Amid market disruption triggered one day before the earnings call by Chinese tech startup DeepSeek’s announcement of cost-efficient yet highly powerful AI models and its launch of a ChatGPT-like application, SAP leadership expressed initial excitement at the apparent breakthrough, as well as a tentative openness to integrating DeepSeek models into its AI Hub, as much as adherence to data privacy regulations will allow.
“Yesterday’s tech news provided another strong validation of our strategy,” Klein told investors. “Thanks to our ecosystem approach on the China AI hub, we are flexible when it comes to AI infrastructure and large language models. We benefit from cost reductions and progress in the LLM space.”
Klein believes that contextual data will differentiate SAP’s embrace of business AI, through the creation of “one semantical data layer” that combines “deep process and industry knowhow” with “access to unique, context-rich business data.” This, more than its choice of LLM, is where SAP is most focusing its AI efforts.
Klein also spoke of a “game-changing innovation” focused on harmonizing structured and unstructured data, in and outside of SAP applications, with relevant semantics to make AI agents more powerful. “Joule will become the super orchestrator of these agents, carrying out complete tasks autonomously and end-to-end, taking over significant workload from humans.” More will be discussed on this front during the SAP Business Unleashed webcast (Feb. 13; register here).
Analysis by Industry Experts
In the analyst community, SAP’s Q4 and full-year 2024 financial results were perceived positively as evidence of the company’s continued cloud momentum, even as questions remain around the importance of business AI to SAP’s customer base.
“It was the quarter we expected to see,” agreed Joshua Greenbaum, Principal at Enterprise Applications Consulting (EAC). “SAP is continuing to execute on its strategy, and—from a revenue perspective—this is clearly working.”
Added Jon Reed, Co-Founder at Diginomica: “SAP is clearly executing on cloud and AI to the satisfaction of the markets.” Still, he said, there remains an important nuance in that SAP’s ambition to become a cloud- and AI-centric business will depend on SAP successfully moving more customers toward GROW with SAP and the public edition of SAP S/4HANA Cloud. “I view the next few years as critical to winning over as many customers on that transformation partner level, and to fulfilling that cloud and AI vision,” he added.
Greenbaum voiced support for the planned ERP transition option discussed by Klein during the teleconference call, explaining that the third-party assets Klein cited could refer not only to databases (particularly Oracle, Microsoft SQL Server, and DB2, which were “relatively popular choices for ECC customers, and particularly for large installations”) but also to “older versions of Java that are not going to be supported by Oracle going forward.” In both cases, Greenbaum said, “these are critical third-party assets” and praised the option as “a good defensive move by SAP to effectively protect these customers from problems they will encounter once these assets become de-supported.”
Similarly, Greenbaum praised Klein’s discussion of the continuous maintenance revenue stream SAP can anticipate as SAP ECC customers not yet moving to the cloud instead proceed into extended maintenance: “He acknowledged to the Wall Street analysts that a significant amount of customers will still be on maintenance and that this maintenance revenue is actually a pipeline for SAP, that it’s a positive.” As SAP continues to make RISE more flexible and add incentives to help these on-premises customers lift and shift their systems in future years, Greenbaum said, “it’s encouraging that SAP is acknowledging this pragmatic problem and reacting appropriately.”
Both analysts agreed with Klein’s sentiment that DeepSeek’s buzzy announcement of cheaper-to-use AI models will ultimately benefit SAP, allowing the company to more affordably train and deploy models with customer data. “The trend that DeepSeek implies toward more efficient and affordable models opens up more room for affordable customer co-innovation,” Reed said. “The only downside is that, if all the major AI companies take a hit, that affects the overall tech climate SAP operates in.”
Greenbaum said SAP’s leadership shifts reflect “the bench strength” of leaders rising within SAP, praising the elevation of Herzig to the CTO role as demonstrating the centrality of AI to SAP’s technology efforts while also signaling the company’s commitment to integrating AI strategy within its larger innovation roadmap. “It’s been a while since SAP had a visionary CTO with a strong forward agenda,” added Reed. “Could Herzig play that role? I think he has the potential to do so.”
As for Steinhaeuser’s new leadership role as COO overseeing the Strategy & Operations board area, “this has as much to do with operational strategy for SAP as it does the go-to-market strategy for the business,” Greenbaum said. “This is a pivotal time for software companies on the AI side to make sure they execute, as there will be plenty of fresh players with new approaches,” added Reed. “This must be done in the context of effective cost management and strategy, which is where Steinhaeuser’s role might come in.”
ASUG will continue to cover the SAP news and announcements discussed in this earnings call as more information becomes available.