SAP's cloud performance alleviates concerns about AI, although profit expectations have declined.

SAP's cloud performance alleviates concerns about AI, although profit expectations have declined.

      SAP provided investors with the figures they were seeking. Europe’s largest software company reported a 22% increase in cloud revenue, reaching €6.28 billion in the second quarter, surpassing expectations, according to SAP's announcement. The company's cloud backlog, a key indicator of future sales, surged by 26%. As a result, shares rose over 6% in Frankfurt.

      This relief is the main takeaway. SAP’s stock has fallen roughly 35% this year, as reported by Bloomberg, amid concerns that AI could undermine the enterprise-software subscription model on which SAP relies. This announcement came during a tense week for tech earnings. A strong performance in cloud sales serves as a clear message: customers continue to sign on rather than leave.

      However, the outlook wasn’t entirely positive. Operating profit increased by 7% to €2.74 billion but fell short of analysts' expectations. Additionally, SAP revised its profit forecast for 2026 to between €11.8 billion and €12.2 billion, as reported by the Wall Street Journal. This adjustment reflects the financial impact of two acquisitions made in July: the data firm Dremio and the AI startup Prior Labs.

      SAP is heavily investing to stay competitive. CEO Christian Klein has reallocated budgets and reshuffled management to support an AI initiative, while also cutting back on hiring and travel expenses to fund this effort. The company aims to transition customers from older on-premise software to the cloud and will soon increase charges for maintaining legacy systems.

      The pressing concern, however, is the effectiveness of SAP’s AI. Klein presents it as an “Autonomous Enterprise” that leverages AI based on a company’s fundamental data. Yet, some customers have raised doubts about the value of SAP’s initial AI offerings, and analysts have a tepid response. “SAP still needs to do more to make its AI story compelling,” remarked Rebecca Wettemann of Valoir. “Simply having all its software on the same platform isn’t a convincing rationale for deploying enterprise AI there.”

      Thus, the quarterly results have mixed implications. The cloud figures indicate that AI has not adversely affected SAP's business, which reassured investors. However, SAP has yet to demonstrate that AI will promote growth, even while it invests to counter competition from companies like Anthropic. For the time being, the affirmation that they are “not victims of disruption” sufficed.

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SAP's cloud performance alleviates concerns about AI, although profit expectations have declined.

SAP exceeded expectations for cloud revenue and increased its backlog by 26%, alleviating concerns that AI would undermine enterprise software subscriptions, despite lowering its profit outlook for 2026.