What SAP’s Cloud & AI Growth Indicate About the AI Market

Enterprise software companies are competing to weave AI into their cloud platforms as businesses hunt for ways to automate operations and squeeze value from mountains of data. 

SAP, the German giant that keeps many of the world’s largest corporations running, has posted third-quarter results showing what is successful in the AI market. 

What SAP’s financial achievements indicate about the AI market

The Walldorf-based firm recorded a cloud backlog of €18.84bn (US$21.9bn) in the three months to September, a 23% jump on the same period last year – and cloud revenue hit €5.29bn (US$6.15bn), up 22%, while the Cloud ERP Suite grew 26% to €4.59bn (US$5.33bn). 

The suite includes S/4HANA Cloud and related enterprise resource planning tools that handle everything from finance to supply chains.

Total revenue also climbed 7% to €9.08bn (US$10.55bn). 

The numbers tell a familiar story: SAP’s long march away from one-off software licences towards recurring subscription fees continues to pay off, with predictable revenue now accounting for 87% of the total. 

Operating profit rose 12% to €2.49bn (US$2.89bn), even after absorbing roughly €0.2bn (US$0.23bn) in costs tied to tax disputes and workforce changes.

Christian Klein, CEO of SAP, says: “We are gaining market share as our customers are adopting solutions across the entire Business Suite, including Business Data Cloud and AI at accelerated pace.”

Inside SAP’s partnership with OpenAI and AWS

September brought a notable tie-up between SAP and OpenAI.

The partnership aims to serve Germany’s public sector by marrying SAP’s enterprise applications with OpenAI’s large language models (LLMs). 

It’s a pitch designed to appeal to government agencies looking to harness Gen AI without building the technology themselves.

SAP has also struck a deal with Amazon Web Services (AWS) to run its Sovereign Cloud on AWS’s European infrastructure, backed by a planned €7.8bn (US$9.1bn) investment from Amazon. 

The Sovereign Cloud addresses a thorny problem for regulators and privacy-conscious organisations: keeping sensitive data within specific borders. 

That matters particularly for government bodies and companies in sectors like finance and healthcare, where data residency rules carry teeth.

The company added several recognisable names to its RISE with SAP programme during the quarter, including Alphabet, ANA Holdings, Computacenter and DXC Technology. 

RISE offers companies a packaged route to overhauling their business systems.

How share buyback supports cloud transition

SAP wrapped up a €5bn (US$5.82bn) share repurchase programme in August, buying back just over 26 million shares at an average price of €188.24 (US$219.13). 

The buyback fits into the broader transformation SAP announced back in 2020, when it committed to shifting from selling perpetual software licences towards cloud subscriptions that generate steadier cash flows.

Dominik Asam, Chief Finance Officer, says: “Q3’s strong performance underscores the strength and agility of our model. 

“Through disciplined execution and a sharp focus on profitability and cash flow, we’ve maintained forward momentum despite an uncertain macroeconomic backdrop.”

The company kicked off another transformation push in January 2024, this time focused on using AI to improve its own operations whilst targeting €10bn (US$11.64bn) in non-IFRS operating profit and €8bn (US$9.31bn) in free cash flow for 2025.

Christian says: “For Q4 we are executing against a strong pipeline – which gives us confidence in our accelerating total revenue growth ambition for 2026.”