WALLDORF (dpa-AFX) - Europe's largest software maker SAP says it is on track to meet its full-year targets in the third quarter following significant growth, particularly in its promising cloud business. Company CEO Christian Klein expects revenue growth and a significant increase in operating profit despite the difficult economic conditions and rising geopolitical tensions. Earnings before interest and taxes in 2023, adjusted for special effects, are expected to increase by 8 to 12 percent year-on-year to between 8.65 billion euros and 8.95 billion euros, the group announced on Wednesday evening after the U.S. close of trading on the stock exchange. SAP shares traded in New York rose sharply after the announcement of the figures and the confirmed outlook.

Klein is targeting a figure of between 27.0 billion euros and 27.4 billion euros for cloud and software revenue, adjusted for the effects of the strong euro year-on-year - that would be a growth rate of six to eight percent after adjusting for currency effects. The increase in the cloud segment - the business of the future declared by SAP's top management - is expected to be significantly higher. After Klein had to row back a bit here in the summer, the forecast was confirmed this time. Cloud revenues are expected to be in a range between 14.0 and 14.2 billion euros, adjusted for currency effects, and thus 23 to 24 percent higher than in 2022.

The cloud business is the Walldorf-based company's declared business of the future. Customers who use SAP software on a cloud basis pay a lower amount over a term of usually three years - but then often remain customers for longer because they can no longer use the software without a contract. Revenue is therefore easier for SAP to plan than in the licensing business, where software is sold for a high one-off payment. In contrast, SAP is gradually reducing the lucrative business of software licenses in return for high one-off payments. The more predictable revenues from cloud subscriptions and the maintenance business for license software are expected to account for 82 percent of total revenues this year, an increase of around 3 percentage points.

However, this change has recently been at the expense of margins time and again. This should come to an end this year, as operating profit is expected to grow faster than revenue in 2023. This would mean that the consolidation of the company's own data centers and the improvements in the profitability of the cloud business would finally pay off. On the stock exchange, this course was recently rewarded. After being one of the biggest losers on the Dax in 2022, with a 23 percent discount, the stock has risen by a quarter so far this year. With a market capitalization of 150 billion euros, SAP is by far the most highly valued German company.

In the three months to the end of September, sales rose by four percent to just over 7.7 billion euros - adjusted for currency effects, the increase was nine percent. Adjusted for currency effects, cloud revenues increased by 23 percent to 3.47 billion euros. Although this meant that SAP fell slightly short of experts' expectations, it was able to significantly accelerate growth compared with the second quarter. By contrast, operating profit was better than analysts had expected. Adjusted for currency effects, operating profit rose by 16 percent to just under 2.3 billion euros. On the bottom line, the group earned 1.7 billion euros, 34 percent more than a year ago.

"Our third quarter results are further evidence that we have entered the next phase of our transformation," Klein said. "We have accelerated cloud growth across our portfolio." In addition, he said, margins in the business increased significantly. In addition to the focus on the cloud, the industry hype around artificial intelligence is also in the spotlight. SAP recently announced further investments and unveiled its AI assistant called Joule. Klein had recently indicated that he was eyeing price premiums of up to 30 percent for AI-enriched programs./zb/he