SAP Shares Tumble as Cloud Growth Forecast Misses Expectations
German software behemoth SAP experienced a significant downturn on Thursday, with its stock price plummeting as much as 16%. This sharp decline followed the company’s announcement of cloud contract backlog growth that fell short of market expectations for the fourth quarter. This marks the most substantial single-day drop for SAP’s stock since October 2020, when it saw a 22% fall in response to disappointing third-quarter results. The stock closed at its lowest point since mid-2024.
In its latest earnings report, SAP revealed that its current cloud backlog increased by 16% in the fourth quarter, reaching 21.1 billion euros (approximately $25.3 billion). Analysts at UBS highlighted this figure as a “disappointment,” contrasting it with prior projections of around 26% growth.
SAP attributed the shortfall in part to the nature of large, transformational deals. In its earnings statement, the company explained that “large transformational deals with high cloud revenue ramps in outer years and termination for convenience clauses required by law negatively impacted fourth quarter constant currency current cloud backlog growth by approximately 1 percentage point.”
Despite the immediate market reaction, Chief Executive Officer Christian Klein expressed optimism, stating that the current cloud backlog established in the final quarter of the year provides a “strong foundation” to accelerate revenue growth through 2027. However, the company did signal a “slight deceleration” in cloud backlog growth for 2026.
Looking at the broader financial picture, SAP reported a modest increase in total revenue for the fourth quarter, reaching 9.7 billion euros, up from 9.4 billion euros in the same period of the previous year. Operating profit also saw a healthy rise, climbing to 2.6 billion euros from 2 billion euros.
The company’s strategic pivot from on-premises software licenses to cloud services has been a significant undertaking in recent years. However, the burgeoning artificial intelligence (AI) landscape has introduced a new layer of investor concern for established software providers.
Dominik Asam, SAP’s Chief Financial Officer, voiced these concerns during an interview, noting that AI’s transformative potential, particularly in code development and software creation, raises questions about future demand. “What is clear is that one of the killer applications of AI is to completely transform the way companies develop code, i.e. software,” Asam stated. “So there is the question, will the customers now not be able to do everything themselves, and that means the pie will shrink?”
He emphasized SAP’s commitment to integrating AI technologies into its research and development efforts. “So it’s all about how quickly can we as SAP actually also embark [on] these technologies in our R&D portfolio to keep the relative economies of scale advantage,” Asam added. “Day in, day out, we work on that and try to actually be a frontrunner on AI adoption amongst our 35,000 developers.” The company’s ability to navigate this AI-driven shift will be critical in maintaining its market position and delivering sustained growth in the evolving technology sector.
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