The numbers tell two starkly different stories. SAP’s cloud backlog hit a record €21.9 billion in the first quarter and its cloud revenue surged 27% to nearly €6 billion. Earnings per share climbed to €1.66 from €1.52 a year earlier. Yet the stock has been sliced nearly in half over the past twelve months, trading at €136.22 — just a few euros above the year low of €130.80 touched on June 25. Since January, the shares have lost more than 32% of their value.
Investors aren’t punishing Walldorf for its own operational failings. The damage came from outside. Oracle’s latest quarterly results sent shockwaves through European software, with the US giant flagging capital expenditure of up to $95 billion for fiscal 2027. The market instantly feared that ballooning AI infrastructure costs would squeeze margins across the sector, and SAP — despite being far less exposed to hardware spending than Oracle — slid around 4% on the day, briefly making it the worst performer in the DAX. A profits warning from Accenture soon after deepened the selloff. “Collateral damage, not self-inflicted,” one trader put it.
A hawkish turn from the Federal Reserve added to the pressure. Chairman Kevin Warsh has signalled that rate increases are at least as likely as cuts. Goldman Sachs now expects no loosening until 2027. Higher rates structurally compress valuations for growth-oriented equities, and SAP — even with its cloud transformation in full swing — is no exception.
Behind the market gloom, SAP is pressing ahead with one of the most ambitious artificial-intelligence rollouts in enterprise software. In June the company released 13 specialised “Joule” assistants for human-resources management, covering everything from recruitment to payroll. These are just the beginning: SAP plans more than 50 Joule assistants and over 200 AI agents across finance, procurement, and supply chains. Seven additional finance‑focused assistants are due by the third quarter of 2026.
Should investors sell immediately? Or is it worth buying SAP?
Simultaneously, SAP has moved to solve one of its biggest data headaches. It is acquiring Dremio, a data‑platform specialist, with the deal expected to close in the third quarter of 2026. Dremio will be integrated with SAP Business Data Cloud and SAP HANA Cloud, making it far easier to combine SAP and non‑SAP data. For large corporate customers struggling with data fragmentation, the acquisition promises a unified foundation for AI applications — a critical piece of the strategy.
A €10 billion share buyback programme, launched in January 2026 and running through the end of 2027, is providing some floor under the stock. The current tranche of up to €2.6 billion expires on July 27. So far SAP has repurchased roughly 16.3 million shares at an average price of €161.16, representing around €2.6 billion of the total authorisation. The buyback has not been enough to arrest the slide, but it has slowed the descent near the year low.
Analysts remain cautiously optimistic. The consensus is a “Moderate Buy” with an average price target of €222.85 — implying potential upside of about 65% from current levels. UBS’s Michael Briest expects margins to improve in the second quarter and holds a €205 target. Berenberg’s Nay Soe Naing calls the sector valuation historically low and sees €215 as achievable. Goldman Sachs, while trimming its gross margin forecast for the second half of 2026, kept its buy rating unchanged.
The next major catalyst is July 23, when SAP reports its half‑year results. With the quiet period now in effect, management cannot comment on business-sensitive matters until then. Investors will focus on two key metrics: the cloud order book and cloud gross margins. Both will reveal whether the AI strategy is translating into commercial momentum — or whether costs are devouring the returns. Starting in August, the EU AI Act will impose stricter rules on high-risk applications. Any compliance‑driven delays to product launches could blunt the very sales argument SAP is betting on most.
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