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SAP's quarterly revenue tops assessments and trims the 2022 profit outlook

SAP beats revenue estimates and trims profit outlook for 2022

July 22, 2022: -On Thursday, SAP reported second-quarter revenue growth of 13%, beating estimates on the increase from its cloud business. However, the German business software group trimmed its profit outlook because of the war in Ukraine.

SAP, making software for managing business processes, which is being moved to subscription-based cloud services from software licenses with up-front fees.

“Our transition to the cloud is after the schedule, and we have exceeded topline expectations, with cloud revenue which becomes SAP’s largest revenue stream,” Chief Executive Officer Christian Klein said.

The company’s cloud revenue increased 34% to 3.06 billion euros in the quarter. The current cloud backlog, measuring incoming business, was up 34% at 10.40 billion euros.

Although, the company reduced its 2022 adjusted profit outlook to between 7.6 billion euros and 7.9 billion euros, from 7.8 billion euros to 8.25 billion euros.

SAP cited an impact of 350 million euros at constant currencies on adjusted profit from the war in Ukraine and a potential refusal in software license revenue.

The company’s departure from Russia and Belarus because of the war in Ukraine led to regarding 120 million euros in severance payments to the employees and asset impairments.

“The exit is always constant. We have notified the employees, and they will exit the company throughout 2022,” Klein said on a call with journalists.

“Several employees might work for us from other locations, but by the end of the year, we will have finished the exit, and I don’t expect a higher number of over 350 million euros.”

Total quarterly revenue increased to 7.52 billion euros at constant currency from 7.08 billion euros. Analysts anticipated 7.32 billion euros, according to the Refinitiv poll.

Adjusted earnings for each share were 28 cents, less than estimates of 44 cents, mainly because of the lower contribution from investments in venture capital company understood as Sapphire Ventures.

Nearly 1 billion euros decreased contribution from Sapphire Ventures from last year.

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