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SAP Q1 results show cloud growth but profit declines

SAP Q1 results show cloud growth but profit declines

The software giant continues to build out its cloud business even while operating profits lag.

This week SAP reported their first-quarter earnings results for 2021. The quarter saw continued strength in the cloud sector and the adoption of S/4HANA. They also saw an increase in interest in their “RISE with SAP” solution.

Cloud revenue grew by 7% year-over-year, to €2.14 billion according to International Finance Reporting Standards (IFRS). But they also reported an operating profit of €0.96 billion IFRS, down 21% year-over-year.

“RISE with SAP” accelerates customers’ business transformations

Christian Klein, SAP’s CEO, praised the Q1 results in the companies official statement. “We are seeing very strong order entry growth across our applications portfolio. And we are just getting started. Our new offering ‘RISE with SAP’ is rapidly becoming a massive accelerator to our customers’ business transformations with our platform at the center. Together with our unique ecosystem of more than 22,000 partners and with a strong innovation pipeline for the year, we are well on track with our strategy to deliver robust cloud growth.”

Overall cloud and software license revenue increased by 1% year-over-year to €5.43 billion (IFRS) and up 6% non-IFRS at constant currencies.

SAP S/4HANA added an additional 400 customers to the roster in Q1 2021, up 16% year-over-year. SAP S/4HANA now accounts for over 16,400 customers, of which roughly 9,600 are now live.

A current cloud backlog of €7.63 billion has been recorded. Current cloud backlog revenue was up 39% to €1.04 billion and up 43% (at constant currencies). S/4HANA cloud revenue was up 36% to €227 million (IFRS and non-IFRS) and up 43% (at constant currencies).

Two of three SAP business segments down, but Qualtrics saves the day

SAP reports on three main business segments, “Applications, Technology & Services,” “Services” and “Qualtrics”. The term Qualtrics refers to the Seattle based company that SAP acquired in 2019.

Applications, Technology & Services revenue decreased by 1% to €5.31 billion year-over-year, up 4% at constant currencies.  

The Services segment, including digital transformation and the Intelligence team, reported revenue of €800 million, down 12% year-over-year (IFRS and non-IFRS), and down 8% (non-IFRS at constant currencies).

Qualtrics revenue, however rose to €202 million, posting an increase of 25% year-over-year, or 37% at constant currencies.