Europe’s AI Champion SAP Secures 85% of 2026 Revenue Amid Deal Surge

While the enterprise AI landscape is largely populated by U.S. giants like Microsoft and Salesforce, German software titan SAP is making a significant push to solidify its position as a key European contender in the rapidly evolving sector.

In an exclusive interview with CNBC’s “Europe Early Edition,” SAP CEO Christian Klein emphasized AI as “the number one reason” driving customer deals with the company. This strong statement underscores the growing importance of AI-driven solutions within SAP’s broader offerings.

“After we close Q4, actually, 80, 85% of our revenue for next year is already done. So, [a] good pipeline for Q4 and with that, when we close out the year, our customers, also our investors, can expect there’s also very positive output,” Klein stated, projecting confidence in the company’s financial outlook.

The company’s cloud backlog experienced a substantial 23% surge in the third quarter, reaching 18.8 billion euros, according to the earnings statement released late Wednesday. This figure highlights the increasing demand for SAP’s cloud-based services, which are increasingly infused with AI capabilities. This backlog translates to a significant level of revenue visibility for the coming year.

“I was pretty optimistic last night, and I’m still optimistic as the pipeline looks good,” Klein commented. “We actually now have our biggest quarter.” This positive sentiment reflects the momentum SAP is experiencing as it capitalizes on the AI wave.

Revenue for the quarter rose 7% to 9.08 billion euros ($10.53 billion), slightly below consensus estimates of 9.15 billion euros as estimated by LSEG. However, cloud revenue witnessed an impressive 22% increase, with Klein attributing this growth to the expanding AI and data cloud market share that SAP is capturing. This revenue shift underscores the increasing significance of cloud-based AI solutions within SAP’s revenue mix and represents a key strategic focus.

Deutsche Bank analysts maintain a positive outlook on SAP, positioning the firm as a “top pick” within the European tech and global software sectors. However, they noted that SAP is now guiding toward the lower-end of its forecast for cloud revenue, between 21.6 billion euros to 21.9 billion euros for the current year. This revision, though modest, is worth noting as it indicates potential challenges in realizing the company’s ambitious cloud growth targets.

“Against an environment of lengthening deal cycles and pushouts … SAP continues to execute very well, in our view, even if delays in deal closings have led the company to guide to the lower end of its Cloud revenue growth range for FY25,” Deutsche Bank analysts, led by Johannes Schaller, explained in a note. This highlights the external challenges influencing SAP’s performance, including macroeconomic uncertainties affecting customer investment decisions. The lengthening deal cycles suggest a more cautious approach among enterprises evaluating and adopting new AI-powered solutions.

SAP’s shares initially saw a 2% rise at the beginning of Thursday’s trading session, but subsequently relinquished gains to trade 2.5% lower. The stock is presently down 3% year-to-date. While the initial positive reaction may have been influenced by AI optimism, the subsequent downturn hints at investor concerns regarding the overall financial performance and the company’s ability to fully capitalize on the long-term potential of AI.

SAP briefly ascended to become Europe’s most valuable company in March, fueled by broader market enthusiasm and gains within the German stock market. This milestone underscored the company’s position as a leading European player in the technology sphere.

The European Union’s AI regulatory framework has garnered criticism, with some industry voices advocating for deregulation to foster accelerated progress in the global AI race. Klein voiced reservations about the EU’s chosen strategy, questioning whether it aligns with the more agile and iterative approach embraced by the U.S., which emphasizes real-world testing and refinement of AI technologies.

The chief executive stressed the company’s unwavering focus on value creation, asserting that this is “100%” what customers demand. This sentiment resonates with other AI companies and investors in Europe, as the current dominance of the U.S. and China in developing and training large language models, the underlying infrastructure for AI, has highlighted the need for Europe to differentiate itself. The consensus is that Europe possesses the potential to take a leadership role in the practical application of AI across various industries and sectors.

Klein views the training of large language models as increasingly commoditized. He anticipates that the emphasis within businesses will shift toward the application of AI to solve specific problems and drive tangible business outcomes. SAP’s strategic focus on this application layer, he believes, will ultimately be reflected in the company’s share price. This strategy underscores the increasing importance of developing industry-specific AI solutions tailored to unique customer needs and challenges.

“It’s super important that we are not only selling into a hype, but that we see real adoption,” Klein emphasized. This statement highlights the importance of moving beyond superficial AI integration to ensure that businesses are genuinely benefiting from the technology by deploying for real-world usecases that drive returns.

SAP maintains a presence in China through partnerships that allow it to operate “in China, for China,” acknowledging geopolitical complexities. Klein recognizes China’s rapid pace of AI development, the relative lack of stringent regulations, and its abundant talent pool as factors that are too significant to disregard. This presence allows SAP to tap into China’s innovation ecosystem and adapt its offerings to meet the specific needs of the Chinese market.

The company offers a broad suite of cloud solutions encompassing expenses, supply chain management, and analytics for corporate clients. Following a significant restructuring in 2024, SAP has strategically pivoted towards AI-driven services, now being deployed across functions such as finance and supplier sourcing. This shift reflects the organization’s commitment to transforming into an AI-first entity, equipping businesses with intelligent tools to optimize their operations and drive innovation.