July 22, 2024
Second Quarter and Half-Year Results 2024
Christian Klein, CEO
“Our cloud growth momentum remained strong in Q2, with Business AI enabling many deals. We continue to execute on our transformation with great discipline, leading to an increase in our operating profit ambition for 2025. At the same time, we continue to invest into our transformation to be the leader in Business AI. Given our progress and strong pipeline, we are confident to achieve accelerating topline growth through 2027."
Dominik Asam, CFO
“We are staying squarely focused on delivering our outlook for this year. Our current cloud backlog growth during the second half of 2024, and especially in Q4 will be decisive to lay a solid foundation for our cloud revenue ambition for 2025. At the same time, we’ll continue to execute against our transformation plan to achieve our 2025 free cash flow ambition despite a mid-triple-digit million cash out for restructuring spilling into next year.”
At a Glance
- Current cloud backlog of €14.8 billion, up 28%, both at nominal and constant currencies
- Cloud revenue up 25%, underpinned by 33% Cloud ERP Suite revenue growth, all at nominal and constant currencies
- Total revenue up 10%, both at nominal and constant currencies
- IFRS cloud gross profit up 29%, non-IFRS cloud gross profit up 28% and up 29% at constant currencies
- IFRS operating profit down 11% due to restructuring expenses of €0.6 billion. Non-IFRS operating profit up 33% and up 35% at constant currencies
- 2024 financial outlook reiterated. 2025 operating profit ambition increased to reflect anticipated incremental efficiency gains from expanded transformation program
Media Coverage
Christian Klein on Bloomberg TV
In this interview with anchor Tom Mackenzie, Christian elaborated why SAP is seeing continuous growth in revenues and profitability, and that AI was a key driver for the results in Q2.
Documents and Links
Financial Performance
All figures are based on SAP group results from continuing operations unless otherwise noted.
Group results at a glance – Second 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 – Six months ended June 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.
Financial Highlights
Financial Highlights
Second Quarter 2024
In the second quarter, SAP’s strong cloud momentum continued. Current cloud backlog grew by 28% to €14.81 billion and again was up 28% at constant currencies. Cloud revenue was up 25% to €4.15 billion and up 25% at constant currencies, mainly driven by Cloud ERP Suite revenue, which was up 33% to €3.41 billion and up 33% at constant currencies.
Software licenses revenue decreased by 28% to €0.2 billion and was down 27% at constant currencies. Cloud and software revenue was up 10% to €7.17 billion and up 10% at constant currencies. Services revenue was up 6% to €1.11 billion and up 6% at constant currencies. Total revenue was up 10% to €8.29 billion and up 10% at constant currencies.
The share of more predictable revenue increased by 2 percentage points to 84% in the second quarter.
Cloud gross profit was up 29% (IFRS) to €3.03 billion, up 28% to €3.04 billion (non-IFRS), and up 29% (non-IFRS at constant currencies).
IFRS operating profit in the second quarter was down 11% to €1.22 billion. The decrease was driven by restructuring expenses of €0.6 billion associated with the 2024 transformation program. Non-IFRS operating profit was up 33% to €1.94 billion and was up 35% at constant currencies. Non-IFRS operating profit growth was supported by strong revenue growth as well as disciplined execution of the 2024 transformation program.
IFRS earnings per share (basic) increased 22% to €0.76. Non-IFRS earnings per share (basic) increased 59% to €1.10. The effective tax rate (IFRS) was 33.8% (Q2/2023: 33.8%) and the effective tax rate (non-IFRS) was 33.6% (Q2/2023: 33.0%). For non-IFRS, the year-over-year increase mainly resulted from a temporary inability to offset withholding taxes in Germany due to tax losses in 2024 resulting from restructuring. For IFRS, the negative effects from withholding taxes were compensated mainly by changes in tax-exempt income and valuation allowances on deferred tax assets.
Free cash flow in the second quarter increased by 114% to €1.3 billion. While around €0.5 billion was paid out for restructuring, the positive development was primarily attributable to increased profitability and enhanced working capital management. For the first six months, free cash flow was up 48% to €3.8 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 June 30, 2024, SAP had repurchased 12,895,525 shares at an average price of €145.20 resulting in a purchased volume of approximately €1.87 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, SAP still expects to exit 2024 at a headcount similar to year-end 2023.
In the second quarter, additional restructuring expenses of €0.6 billion were recorded, which mainly reflect the positive reception of the voluntary leave programs.
While restructuring expenses recorded in the first half of 2024 total €2.9 billion, the overall expenses associated with the program are now estimated to be approximately €3 billion.
Restructuring payouts in the second quarter and first half of 2024 amounted to €0.5 billion. 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.
Business Highlights
Business Highlights
In the second quarter, customers around the globe continued to choose “RISE with SAP” to drive their end-to-end business transformations. These customers included: Alpargatas, Auckland Council, Blue Diamond Growers, Border States, Copenhagen Airports, ExxonMobil, Navantia, PANDORA, Porsche Informatik, Powerlink Queensland, Prairie Farms Dairy, ProRail, Prysmian, Shiseido Company, Tokio Marine & Nichido Fire Insurance, VistaPrint, Warsaw City Hall, and Xerox.
BMI Group Holdings, Co-op, Fiagril, Pure Storage, UBE Corporation, and Wegmans went live on SAP S/4HANA Cloud in the second quarter.
Consolidated Hospitality Supplies, flatexDEGIRO, Fortera Corporation, La Trobe University, Stern-Wywiol Gruppe, and Trade Capital Corporation 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: Accenture, Ambipar, Arca Continental, BASF, Buderus Guss, Carl Zeiss, DACHSER, Endress+Hauser, iHerb, Lenovo, Minor Hotels, New Look, Parle Biscuits, Refresco, U.S. Sugar, Veolia Group, and Zoomlion.
Beiersdorf, E.ON, Gerdau, Hyundai Motor Company, Kia Corporation and SMA Solar Technology went live on SAP solutions.
In the second quarter, SAP’s cloud revenue performance was particularly strong in APJ and EMEA and robust in the Americas region. Brazil, Canada, Germany, India, Japan, and South Korea had outstanding performances in cloud revenue growth while China, the U.S., and Saudi Arabia were particularly strong.
On April 22, SAP announced AI advancements in its supply chain solutions that we anticipate will unleash a transformative wave of productivity, efficiency and precision in manufacturing. AI-driven insights from real-time data will help companies use their own data to make better decisions across supply chains, streamline product development and improve manufacturing efficiency.
On May 6, SAP announced that it had extended the contract of CEO and Member of the Executive Board Christian Klein for three years, until April 2028.
On May 8, SAP and IBM announced their vision for the next era of their collaboration, which includes new generative AI capabilities and industry-specific cloud solutions that can help clients unlock business value.
On May 13, SAP announced that Charoen Pokphand Foods Public Company Limited (“CP Foods”) had selected multiple SAP solutions to drive further growth and competitive advantage and to ensure the sustainability of its products for the future.
On May 15, SAP announced that the Annual General Meeting (AGM) of Shareholders of SAP SE elected Pekka Ala-Pietilä as new member of the company’s Supervisory Board. Subsequently, Ala-Pietilä was also elected the new Chairman of the SAP Supervisory Board, completing the handover from former Chairman of the Board, Prof. Dr. h. c. mult. Hasso Plattner. In addition, Prof. Dr. Ralf Herbrich was elected and Aicha Evans, Gerhard Oswald and Dr. Friederike Rotsch were reelected as members of the Supervisory Board. The AGM also approved all other proposals of the Executive Board and Supervisory Board with strong support. That includes the adjustment of the compensation of the Chairman of the Supervisory Board. Furthermore, the dividend proposal of €2.20 per share for fiscal year 2023 was approved.
On May 29, SAP and Amazon Web Services (AWS), an Amazon.com company, announced an expanded, strategic collaboration to transform modern cloud enterprise resource planning (ERP) experiences and help enterprises drive new capabilities and efficiencies with generative artificial intelligence (AI).
On June 5, SAP and WalkMe Ltd. (Walkme) announced that the companies had entered into a definitive agreement under which SAP will acquire 100% of WalkMe, a leader in digital adoption platforms. The Executive and Supervisory Boards of SAP SE and the board of directors of WalkMe have approved the transaction for US $14.00 per share in an all-cash transaction, representing an equity value of approximately US $1.5 billion. The offer price represents a 45% premium to WalkMe’s closing share price on June 4, 2024. The acquisition is subject to customary closing conditions, including the receipt of WalkMe shareholder approval and necessary regulatory clearances, and is expected to close in the third quarter of 2024.
On June 5, SAP announced that it was adjusting its dividend policy effective immediately. The new policy is to pay a dividend amounting to at least 40% of the group’s non-IFRS profit after tax from continuing operations (previously: at least 40% of the group’s IFRS profit after tax).
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.
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.
- €29.0 – 29.5 billion cloud and software revenue at constant currencies (2023: €26.92 billion), up 8% to 10% at constant currencies.
- €7.6 – 7.9 billion non-IFRS operating profit at constant currencies (2023: €6.51 billion), up 17% to 21% at constant currencies.
- Free cash flow of approximately €3.5 billion (2023: €5.09 billion).
- 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.
[2]The 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 June 30, 2024 Rates Apply for 2024
| Q3 2024 | FY 2024 | |
| Cloud revenue growth | +0.5pp | -0.5pp |
| Cloud and software revenue growth | +0.5pp | -0.5pp |
| Operating profit growth (non-IFRS) | +0.0pp | -1.5pp |
Non-Financial Outlook 2024
SAP now expects the Employee Engagement Index to be in a range of 70% to 74% in 2024 (previously: 76% to 80%).
In 2024, SAP continues to expect:
- 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%.
Ambition 2025
SAP is updating its financial ambition 2025, reflecting the anticipated incremental benefits from the transformation program.
By 2025, SAP now expects:
- Non-IFRS operating profit of approximately €10.2 billion (previously: approximately €10 billion).
SAP continues to expect:
- Cloud revenue of more than €21.5 billion.
- Total revenue of more than €37.5 billion.
- Non-IFRS cloud gross profit of approximately €16.2 billion.
- Free cash flow of approximately €8.0 billion (now including an anticipated mid-triple-digit million Euro restructuring payout in 2025 associated with the 2024 transformation program).
- A share of more predictable revenue of approximately 86%.
The 2025 financial ambition is based on an exchange rate of 1.10 USD per EUR.
Non-Financial Ambition 2025
For 2025, SAP now aims to increase the Employee Engagement Index (previously: Steadily increasing the Employee Engagement Index).
SAP continues to aim for
- Steadily increasing the Customer Net Promoter Score.
The 2025 non-financial ambitions are in addition to our medium-term targets of achieving Net Zero carbon emissions across the value chain by 2030 and reaching 25% women in executive roles by the end of 2027.