SAP secured a crucial security clearance from Germany’s BSI this month, allowing government agencies to process classified data in its cloud. The milestone should be a catalyst. Instead, the stock keeps sliding, dragged down by fears that the entire enterprise software sector is overinvesting in AI.
The trigger: Oracle’s June 10 earnings release. Despite record revenue and an earnings beat, the US giant announced plans to spend as much as $95 billion on infrastructure by 2027. That spooked investors, who now question when the massive AI outlays will deliver returns. A subsequent sector downgrade by UBS on European IT stocks added fuel. SAP shares have lost roughly 28% to 30% year-to-date, trade about 45% below their July 2025 high, have shed 8% in a single week, and are flirting with the 52-week low at €142.50.
Yet SAP’s first-quarter results tell a different story. Cloud revenue jumped 27%, total revenue came in at €9.6 billion, and operating profit rose 24% to €2.9 billion. The cloud backlog — contracted orders yet to be recognized — surged to €21.9 billion on a currency-adjusted basis. For the full year, SAP expects cloud revenue between €25.8 billion and €26.2 billion. These are hardly numbers that justify a rout.
Should investors sell immediately? Or is it worth buying SAP?
SAP is pressing ahead with its AI strategy. From June 2026, it will make 13 Joule assistants generally available for human resources, with plans to roll out more than 200 specialized AI agents for finance, procurement, and other functions. But monetization remains a work in progress. For RISE customers, three assistants are free for the first year, and full access requires premium subscriptions. Meanwhile, the company extended a free trial for Joule through the end of 2026, a sign that adoption needs a push. JPMorgan analyst Toby Ogg noted that Oracle’s Cloud apps growth showed its first slowdown, which could be a mild negative signal for SAP’s near-term software business.
Bright spots exist. The BSI clearance opens the door for German federal agencies to use SAP’s cloud for confidential work. In France, CEO Christian Klein plans to invest up to €300 million in local cloud capacity, with three new data centers opening in Paris in the first quarter of 2027. SAP will offer services through the Bleu platform and is targeting France’s highest cybersecurity certification. On the M&A front, the company has completed three acquisitions: Reltio for master data management, Dremio for real-time analytics in SAP Business Data Cloud, and Prior Labs for AI model expertise on structured data. To fund the buying spree, SAP issued a €3.5 billion bond in four tranches in May.
All eyes are now on the half-year report due July 23. Investors will scrutinize the cloud backlog and cloud gross margin — two metrics that will show whether the AI strategy is generating real commercial momentum. If the growth pace from the first quarter holds, the external sector headwinds may become harder to justify.
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