October 21, 2024
Third Quarter Results 2024
Christian Klein, CEO
“Q3 was another strong quarter for SAP, and we are confidently raising our 2024 financial outlook. Cloud revenue growth developed remarkably well in the quarter, especially for our Cloud ERP Suite. Even more importantly, we are making strong progress on Business AI with groundbreaking innovations such as SAP Knowledge Graph. A significant part of our cloud deals in Q3 included AI use cases."
Dominik Asam, CFO
“We are very pleased with our third quarter performance. The 2024 transformation program has already started to yield efficiency improvements. This allowed us to deliver a strong operating profit and free cash flow, while retaining our topline momentum.
We’re now focused on carrying that momentum into Q4 to safeguard the achievement of our 2025 ambition amidst a highly volatile environment.”
At a Glance
Current cloud backlog of €15.4 billion, up 25% and up 29% at constant currencies
Cloud revenue up 25% and up 27% at constant currencies
Cloud ERP Suite revenue up 34% and up 36% at constant currencies
Total revenue up 9% and up 10% at constant currencies
IFRS cloud gross profit up 26%, non-IFRS cloud gross profit up 27% and up 28% at constant currencies
IFRS operating profit up 29%, non-IFRS operating profit up 27% and up 28% at constant currencies
SAP raises its 2024 outlook for cloud and software revenue, operating profit and free cash flow
Documents and Links
Financial Performance
Group results at a glance – Third quarter 2024
1 For a breakdown of the individual adjustments see table “Non-IFRS Operating Expense Adjustments by Functional Areas” in this Quarterly Statement.
2 Cloud ERP Suite references the portfolio of strategic Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS) solutions that are tightly integrated with our core ERP solutions and are included in key commercial packages, such as RISE with SAP. The following offerings contribute to Cloud ERP Suite revenue: SAP S/4HANA Cloud, SAP Business Technology Platform, and core solutions for HR and payroll, spend management, commerce, customer data solutions, business process transformation, and working capital management. For additional information and historical data on Cloud ERP Suite, see SAP’s Reporting Framework.
3 Extension Suite references SAP’s remaining SaaS and PaaS solutions that supplement and extend the functional coverage of the Cloud ERP Suite.
4 Infrastructure as a service (IaaS): The major portion of IaaS comes from SAP HANA Enterprise Cloud.
5 From continuing and discontinued operations.
Group results at a glance – Nine months ended September 2024
| IFRS | Non-IFRS1 | |||||||
| € million, unless otherwise stated | Q1–Q3 2024 | Q1–Q3 2023 | ∆ in % | Q1–Q3 2024 | Q1–Q32023 | ∆ in % | ∆ in % const. curr. | |
| SaaS/PaaS | 12,016 | 9,401 | 28 | 12,016 | 9,401 | 28 | 29 | |
| Thereof Cloud ERP Suite revenue2 | 10,217 | 7,695 | 33 | 10,217 | 7,695 | 33 | 34 | |
| Thereof Extension Suite revenue3 | 1,799 | 1,706 | 5 | 1,799 | 1,706 | 5 | 6 | |
| IaaS4 | 417 | 564 | -26 | 417 | 564 | -26 | -25 | |
| Cloud revenue | 12,433 | 9,965 | 25 | 12,433 | 9,965 | 25 | 26 | |
| Cloud and software revenue | 21,563 | 19,542 | 10 | 21,563 | 19,542 | 10 | 11 | |
| Total revenue | 24,798 | 22,739 | 9 | 24,798 | 22,739 | 9 | 10 | |
| Share of more predictable revenue (in %) | 84 | 82 | 2pp | 84 | 82 | 2pp | ||
| Cloud gross profit | 9,052 | 7,121 | 27 | 9,101 | 7,152 | 27 | 28 | |
| Gross profit | 17,990 | 16,330 | 10 | 18,039 | 16,388 | 10 | 11 | |
| Operating profit (loss) | 2,648 | 3,897 | -32 | 5,717 | 4,546 | 26 | 27 | |
| Profit (loss) after tax from continuing operations | 1,534 | 2,399 | -36 | 3,660 | 3,019 | 21 | ||
| Profit (loss) after tax5 | 1,534 | 4,763 | -68 | 3,660 | 4,801 | -24 | ||
| Earnings per share - Basic (in €) from continuing operations | 1.31 | 2.07 | -37 | 3.13 | 2.59 | 21 | ||
| Earnings per share - Basic (in €)5 | 1.31 | 4.21 | -69 | 3.13 | 4.39 | -29 | ||
| Net cash flows from operating activities from continuing operations | 5,772 | 4,284 | 35 | |||||
| Free cash flow | 5,031 | 3,423 | 47 | |||||
1 For a breakdown of the individual adjustments see table “Non-IFRS Operating Expense Adjustments by Functional Areas” in this Quarterly Statement.
2 Cloud ERP Suite references the portfolio of strategic Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS) solutions that are tightly integrated with our core ERP solutions and are included in key commercial packages, such as RISE with SAP. The following offerings contribute to Cloud ERP Suite revenue: SAP S/4HANA Cloud, SAP Business Technology Platform, and core solutions for HR and payroll, spend management, commerce, customer data solutions, business process transformation, and working capital management. For additional information and historical data on Cloud ERP Suite, see SAP’s Reporting Framework.
3 Extension Suite references SAP’s remaining SaaS and PaaS solutions that supplement and extend the functional coverage of the Cloud ERP Suite.
4 Infrastructure as a service (IaaS): The major portion of IaaS comes from SAP HANA Enterprise Cloud.
5 From continuing and discontinued operations.
Financial Highlights
Financial Highlights1
Third Quarter 2024
In the third quarter, SAP’s strong business momentum continued. Current cloud backlog grew by 25% to €15.38 billion and was up 29% at constant currencies. The acquisition of WalkMe contributed approximately 1 percentage point to that growth rate. Cloud revenue was up 25% to €4.35 billion and up 27% at constant currencies, fueled by Cloud ERP Suite revenue, which was up 34% to €3.64 billion and up 36% at constant currencies.
Software licenses revenue decreased by 15% to €0.28 billion and was down 14% at constant currencies. Cloud and software revenue was up 11% to €7.43 billion and up 12% at constant currencies. Services revenue was down 2% to €1.04 billion and down 2% at constant currencies. Total revenue was up 9% to €8.47 billion and up 10% at constant currencies.
The share of more predictable revenue increased by 2 percentage points to 84% in the third quarter.
IFRS cloud gross profit was up 26% to €3.18 billion. Non-IFRS cloud gross profit was up 27% to €3.21 billion and was up 28% at constant currencies.
IFRS operating profit in the third quarter was up 29% to €2.21 billion. Non-IFRS operating profit was up 27% to €2.24 billion and was up 28% at constant currencies. Operating profit growth was mainly driven by strong revenue growth as well as disciplined execution of the 2024 transformation program.
IFRS earnings per share (basic) increased 15% to €1.25. Non-IFRS earnings per share (basic) increased 6% to €1.23. IFRS effective tax rate was 33.0% (Q3/2023: 27.8%) and non-IFRS effective tax rate was 33.4% (Q3/2023: 27.1%). Both year-over-year increases mainly resulted from a temporary inability to offset withholding taxes in Germany due to tax losses in 2024 resulting from restructuring.
Free cash flow in the third quarter increased by 44% to €1.25 billion. While around €0.3 billion was paid out for restructuring, the positive development was primarily attributable to increased profitability and lower tax payments. For the first nine months, free cash flow was up 47% to €5.03 billion.
Share Repurchase Program
In May 2023, SAP announced a share repurchase program with an aggregate volume of up to €5 billion and a term until December 31, 2025. As of September 30, 2024, SAP had repurchased 16,709,250 shares at an average price of €157.09 resulting in a purchased volume of approximately €2.62 billion under the program.
2024 Transformation Program: Focus on scalability of operations and key strategic growth areas
In 2024, SAP is further increasing its focus on key strategic growth areas, in particular business AI. It is transforming its operational setup to capture organizational synergies and AI-driven efficiencies, and to prepare the company for highly scalable future revenue growth.
To this end, as announced in January, SAP is executing a company-wide restructuring program which is anticipated to conclude in early 2025. The restructuring is intended to ensure that SAP’s skillset and resources continue to meet future business needs and is currently expected to affect 9,000 to 10,000 positions, a majority of which will be covered by voluntary leave programs and internal re-skilling measures. Reflecting re-investments into strategic growth areas and the acquisition of WalkMe, SAP now expects to exit 2024 at a headcount slightly ahead of year-end 2023.
While restructuring expenses recorded in the first nine months of 2024 total €2.8 billion, the overall expenses associated with the program are estimated to be approximately €3 billion.
Restructuring payouts in the third quarter and first nine months of 2024 amounted to €0.3 billion and €0.8 billion respectively. Overall payouts associated with the program are currently expected at approximately €3 billion, of which a mid-triple-digit million amount is expected to occur in 2025.
1 The Q3 2024 results were also impacted by other effects. For details, please refer to the disclosures on page 24 of the quarterly statement.
Business Highlights
Business Highlights
In the third quarter, customers around the globe continued to choose “RISE with SAP” to drive their end-to-end business transformations. These customers included: B3, CAF - the Development Bank of Latin America and the Caribbean, Chalhoub Group, Cochlear, Dakota Provisions, E.ON, eBay, Energy Queensland, Equinor, FairPrice Group, Gestamp Servicios, JAPAN AIRLINES, Lands’ End, Mercado Libre, Mondelez International, OLAM Global Agri, Roche, Rolls-Royce Power Systems, Schwarz Group, Siemens Healthineers, Southern Glazer's Wine & Spirits, SRAM, Tetra Pak, ZEON Corporation, and Zwilling.
Clorox, CPKC Railways, J.M. VOITH, KAESER KOMPRESSOREN, Nvidia, Panasonic Energy of North America, and VistaPrint went live on SAP S/4HANA Cloud in the third quarter.
Dawn Foods, DXC Technology, Gainsight, L’OCCITANE Group, Mistral AI, Palmer Candy, The Pool Tile Company, and SCHURTER Holding chose “GROW with SAP”, an offering helping customers adopt cloud ERP with speed, predictability, and continuous innovation.
Key customer wins across SAP’s solution portfolio included: AAK, Aramark, Bosideng, BY-HEALTH, Continental Automotive Technologies, Duni Group, Hamburg Commercial Bank, HR Campus, Kruger Services, Manchester City Council, Merck KGaA, PayPal, pfm medical, RWE, and VP Bank.
Breakthru Beverage Group, Cox Automotive Australia, and Heartland Dental went live on SAP solutions.
In the third quarter, SAP’s cloud revenue performance was particularly strong in APJ and EMEA and robust in the Americas region. Brazil, Chile, Germany, Italy, India, Japan and Spain had outstanding performances in cloud revenue growth while China, Saudi Arabia and the U.S. were particularly strong.
On July 30, SAP announced that the SAP Supervisory Board reached a mutual agreement with Executive Board Members Scott Russell and Julia White to leave the company’s Executive Board, effective August 31.
On September 3, SAP announced that the SAP Supervisory Board reached a mutual agreement with Chief Technology Officer and Executive Board Member Dr.-Ing. Juergen Mueller to leave the company’s Executive Board, effective September 30, 2024.
On September 12, SAP announced that it successfully completed its acquisition of WalkMe Ltd., a leading digital adoption platform company.
Business Outlook
Business Outlook
Financial Outlook 2024
SAP’s financial outlook 2024 is based on SAP’s updated non-IFRS definition of profit measures which, beginning in 2024, include share-based compensation expenses and exclude gains and losses from equity securities, net. For more details, please refer to the Reporting Framework section on our Investor Relations website.
For 2024, SAP is updating its cloud and software revenue, operating profit and free cash flow outlook and now expects:
€29.5 – 29.8 billion cloud and software revenue at constant currencies (2023: €26.92 billion), up 10% to 11% at constant currencies, raising the midpoint by €400 million. The previous range was €29.0 – 29.5 billion at constant currencies.
€7.8 – 8.0 billion non-IFRS operating profit at constant currencies (2023: €6.51 billion), up 20% to 23% at constant currencies, raising the midpoint by €150 million. The previous range was €7.6 – 7.9 billion at constant currencies.
€3.5 – 4.0 billion free cash flow (2023: €5.09 billion). The previous outlook was approximately €3.5 billion.
SAP continues to expect:
€17.0 – 17.3 billion cloud revenue at constant currencies (2023: €13.66 billion), up 24% to 27% at constant currencies.
An effective tax rate (non-IFRS) of approximately 32% (2023: 30.3%) 2.
While SAP’s 2024 financial outlook is at constant currencies, actual currency reported figures are expected to be impacted by currency exchange rate fluctuations as the company progresses through the year, as reflected in the table below.
2The effective tax rate (non-IFRS) is a non-IFRS financial measure and is presented for supplemental informational purposes only. We do not provide an outlook for the effective tax rate (IFRS) due to the uncertainty and potential variability of gains and losses associated with equity securities, which are reconciling items between the two effective tax rates (non-IFRS and IFRS). These items cannot be provided without unreasonable efforts but could have a significant impact on our future effective tax rate (IFRS).
Currency Impact Assuming September 30, 2024 Rates Apply for 2024
| Q4 2024 | FY 2024 | |
| Cloud revenue growth | -3.0pp | -1.0pp |
| Cloud and software revenue growth | -2.0pp | -1.0pp |
| Operating profit growth (non-IFRS) | -2.0pp | -2.0pp |
Non-Financial Outlook 2024
In 2024, SAP continues to expect:
The Employee Engagement Index to be in a range of 70% to 74%.
A Customer Net Promoter Score of 9 to 13.
To steadily decrease carbon emissions across the relevant value chain, in line with our target of achieving Net Zero carbon emissions by 2030.
To steadily increase the number of women in executive roles in line with our end of year 2027 target to achieve 25%.