The whiplash was brutal. On Thursday, SAP shares touched a new 52-week low of €127.52, deepening a sell-off that had already erased more than 40% of the stock’s value over the past twelve months. By Friday’s close, the mood had flipped entirely: the stock surged 9.15% to €140.80, its biggest single-day gain in months. The catalyst was a quarterly update that showed the cloud engine is still firing on all cylinders — even if the cost of keeping it running is rising.
Cloud Backlog Accelerates Past Expectations
The headline number that ignited the rally was the cloud backlog. At the end of the second quarter, SAP’s current cloud order book stood at €22.93 billion, up 27% year-on-year. That growth rate actually accelerated from the prior quarter, and it comfortably beat analyst forecasts. The cloud ERP suite, the crown jewel of the company’s transformation, generated €5.53 billion in revenue, a 27% increase that now accounts for nearly 90% of total cloud sales.
Total cloud revenue for the quarter hit €6.28 billion, up 22% from a year earlier. The message from Walldorf was clear: despite macroeconomic uncertainty and geopolitical tensions that have lengthened decision cycles among large enterprise customers, demand for SAP’s cloud offerings remains robust.
AI Ambitions Come With a Price Tag
Chief executive Christian Klein is betting heavily on the “Autonomous Enterprise” vision, embedding artificial intelligence directly into customers’ core business processes. That strategy is gaining traction: AI and data cloud solutions were part of more than 90% of the 50 largest deals closed during the quarter. SAP plans to roll out over 400 autonomous AI agents by year-end, with the “Joule” assistant automating workflows across its platform.
But building that capability isn’t cheap. To strengthen its AI and data infrastructure, SAP completed two acquisitions in July: Dremio, a data lakehouse platform, closed on July 6, and Prior Labs, an AI specialist, on July 17. The integration costs from these deals are now weighing on near-term margins. As a result, SAP trimmed its full-year operating profit guidance. The company now expects currency-adjusted operating profit between €11.8 billion and €12.2 billion, down from the previous range of €11.9 billion to €12.3 billion.
The IFRS operating profit for the second quarter came in at €2.6 billion, up 8% year-on-year, while earnings per share jumped 30% to €1.89. SAP maintained its cloud revenue target of €25.8 billion to €26.2 billion for the full year.
Should investors sell immediately? Or is it worth buying SAP?
Analyst Reactions Split on Margin Pressure
The market’s enthusiasm was not universally shared by the analyst community. Charles Brennan at Jefferies reaffirmed his “Buy” rating with a €210 price target, arguing that the strong backlog validates the demand story and should provide near-term momentum for the stock after its steep decline.
Toby Ogg at JPMorgan struck a more cautious tone, keeping a “Neutral” rating and €175 target. He pointed to the negative surprise on margins and noted that the revised profit guidance now hinges on a meaningful acceleration of earnings growth in the second half of the year — something that is far from guaranteed. Deutsche Bank Research, however, remained bullish, setting a €200 price target.
Technical Reversal Offers Little Comfort on the Long View
Friday’s close at €140.80 brought the stock back above its 50-day moving average of €144.01, a level it had been trading well below just 24 hours earlier. The 9.15% bounce from the 52-week low of €127.52 represents a sharp technical reversal, but the longer-term picture remains grim. Year-to-date, SAP shares are still down 32.42%, and over the past twelve months the decline stands at 42.24%. The stock remains nearly 45% below its 52-week high of €254.15.
The annualized volatility of roughly 43.5% underscores just how skittish the market has become about SAP’s trajectory. Investors are watching closely to see whether the AI agent rollout can translate into measurable revenue growth — and whether the backlog strength can offset the margin dilution from the acquisition spree.
A Looming Catalyst in the Legacy Business
One structural tailwind could provide additional support in the coming quarters. Standard maintenance for SAP’s legacy ECC 6.0 system is set to expire in 2027, forcing a wave of on-premise customers to migrate to the cloud. That transition is already starting to show up in the order book, and it should continue to underpin backlog growth even if new customer acquisition slows.
For now, SAP finds itself in a familiar position: executing well on its strategic shift, but paying a short-term price for the investments needed to get there. The question that Friday’s rally did not fully answer is whether the market has the patience to wait for the payoff.
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