(new: share price, statements from press conference)
WALLDORF (dpa-AFX) – Europe's largest software maker SAP cannot console its investors with a promised acceleration in revenue growth amid disappointment over its current situation. Toward the end of last year, the Walldorf-based company failed to close as many contracts in the growth area of cloud software as hoped. Even in 2026, the growth of the contract backlog over the next twelve months will decline compared to the previous year. In an effort to keep investors engaged, the DAX heavyweight plans to spend up to ten billion euros on share buybacks over two years. Nevertheless, the stock took a heavy hit.
By midday, the stock had slumped around 16 percent to 165 euros, making it the clear laggard on the DAX and marking its lowest level in two years. The share has already been struggling. In recent months, investors have repeatedly turned away from software stocks, fearing increased competition and a tougher environment in the wake of the rapid growth of AI applications. SAP's share price has lost more than 40 percent from its record high nearly a year ago.
According to SAP CEO Christian Klein, investors are currently withdrawing money from software providers to invest in companies expanding AI capacities and chip manufacturing. Hundreds of billions are earmarked for this in the tech sector, especially in the United States. Although it remains unclear whether these investments will pay off, the share price of AI chip giant Nvidia has risen by half over the past twelve months, while that of chip equipment supplier ASML has surged by 80 percent. Klein, however, remains convinced that significant value creation will ultimately be generated through the software used with these chips.
JPMorgan analyst Toby Ogg considered SAP's outlook for free cash flow in the new year surprisingly strong. However, the cloud contract backlog disappointed, and the cloud revenue forecast for 2026 is slightly below market expectations. Jefferies expert Charles Brennan also pointed to a decline in customer satisfaction, which the company attributes to lower ratings from customers using on-premises software.
Despite the currently gloomy outlook, SAP CEO Klein – as promised in medium-term planning – is banking on further acceleration in revenue and an expansion of profitability. "SAP Business AI has become a key growth driver and was already included in two-thirds of our cloud contract signings in the fourth quarter," said the manager, who also has high hopes for the future of artificial intelligence (AI) applications.
Product revenue from cloud software and traditional licenses is expected to grow by 12 to 13 percent in constant currency by 2026, with cloud software alone for use over the internet projected to increase by 23 to 25 percent, the company announced on Thursday.
The North Baden-based company also aims to increase its adjusted earnings before interest and taxes (Ebit) by 14 to 18 percent, excluding currency fluctuations. This would further improve the margin. With these targets, SAP is in line with analysts' expectations.
However, the cloud order backlog over twelve months (Current Cloud Backlog – CCB) is expected to grow more slowly than in the previous year. Already in 2025, the backlog of contractually secured payments did not increase as rapidly as before. CFO Dominik Asam said the decline in the growth rate, however, will not be as pronounced as recently.
With a currency-adjusted increase of 25 percent in the short-term cloud contract backlog, SAP missed its own target by one percentage point last year. Investors are sensitive when it comes to this metric – as it forms the basis for future booked revenue in subscription contracts.
In the fourth quarter, some large deals were in the sales pipeline that, due to their complexity, will take longer to implement and therefore generate the bulk of their revenue later, Asam said. Additionally, some completed public contracts did not flow into the contract backlog due to special cancellation rules for some of these agreements. Fundamentally, however, SAP continues to benefit from strong demand – also because customers, given the geopolitical situation, are increasingly focusing on data sovereignty.
The company announced a new share buyback program of up to 10 billion euros over two years. SAP regularly buys back shares for its employee stock-based compensation program – according to SAP, this amounts to 1.5 to 2 billion euros per year. The remainder goes to shareholders. Share buybacks are popular with large investors as they increase earnings per remaining share, among other benefits. However, there is also criticism that the money could be better spent on investments and serves merely to support the share price.
In 2025, the group's revenue rose by eight percent to 36.8 billion euros, thanks to strong growth in cloud software, although the weak dollar was a significant drag, costing three percentage points of revenue growth. Adjusted operating profit increased by 28 percent to 10.4 billion euros, partly due to savings from a major personnel restructuring, and was thus slightly better than experts had estimated.
Net profit grew to 7.5 billion euros, more than double the previous year. In the prior year, job cuts had weighed on results with costs in the billions. This time, SAP set aside 174 million euros for an old legal dispute in the US with Teradata. The case concerns, among other things, antitrust allegations related to SAP's Hana database technology./men/nas/jha/
