A stock that had shed nearly 27% of its value since the start of the year just staged one of its most dramatic single-day comebacks. SAP’s shares vaulted more than 5% on Friday to close at €147.64, snapping a prolonged slide that had wiped out more than €70 from the 52-week high of over €271. The trigger: a first-quarter earnings report that demolished analyst expectations on both the top and bottom lines.
The Numbers That Changed the Narrative
Revenue for the opening quarter reached €9.56 billion, while earnings per share came in at €1.66 — comfortably ahead of the consensus estimate. On a non-IFRS basis, EPS stood at €1.72, roughly 20% higher than the prior-year period. The cloud business, long the centerpiece of SAP’s transformation story, delivered constant-currency growth of 27%, pushing the cloud backlog to €21.9 billion — a 25% increase on the same basis.
What truly caught the market’s attention, however, was the margin performance. The operating margin jumped from 25.9% to 28.7% year-on-year, a clear payoff from the cost-cutting initiatives the company has been pushing through. Analysts at Deutsche Bank described the quarter as a clear relief, while Bernstein Research lifted its price target to €276, implying roughly 87% upside from Friday’s close. HSBC upgraded the stock from Hold to Buy.
The Cracks Beneath the Surface
For all the euphoria, the quarter was not without its blemishes. Free cash flow slipped 9% to €3.25 billion, weighed down by a €408 million settlement payment in the Teradata legal dispute. CFO Dominik Asam cautioned that one-off effects had inflated cloud growth in the first quarter, warning of a slowdown in the second quarter.
The full-year guidance — cloud revenue between €25.8 billion and €26.2 billion — was reaffirmed but came with caveats. Geopolitical tensions in the Middle East have weighed on the pipeline since mid-March. Some government clients have paused procurement processes. And the integration of the Reltio acquisition needs to proceed without hiccups.
Barclays trimmed its price target from $283 to $256 while maintaining an Overweight rating, reflecting the tension between strong execution and persistent uncertainty.
Should investors sell immediately? Or is it worth buying SAP?
A Strategic Pivot on AI Pricing
SAP is also preparing a fundamental shift in how it monetizes artificial intelligence. Starting in July, the company plans to introduce consumption-based billing for its AI services, moving away from traditional subscription models. The details of this strategy will be unveiled at the SAP Sapphire conference starting May 11, where management is expected to demonstrate how the new pricing will underpin growth in the second half of the year.
Not everyone is convinced. DZ Bank continues to recommend selling the stock, citing intense competition in the AI space. The shift to usage-based pricing carries execution risk, and the market will be watching closely whether customers embrace the model or push back.
Cash Returns Keep the Base Steady
While the earnings surprise drove the headline move, SAP has been quietly supporting its stock through aggressive buybacks. Through the end of April, the company repurchased roughly 16 million shares for about €2.6 billion. The broader buyback program runs through 2027 with a maximum volume of €10 billion.
At the annual general meeting on May 5, the board will propose a dividend of €2.50 per share, maintaining the payout trajectory from last year.
The Road Ahead: Proof, Not Promises
SAP’s stock now trades roughly 46% below its 52-week high — a gap that underscores how much uncertainty remains baked into the valuation. The first-quarter results have bought the company breathing room, but the real test comes in the months ahead. Can cloud growth sustain its momentum without one-off boosts? Will the AI monetization strategy gain traction? And can the margin improvements hold as competition intensifies?
For now, the market has chosen to celebrate the surprise. But the underlying challenges — geopolitical headwinds, a slowing pipeline, and the complexity of a business model transformation — remain very much in play.
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