SAP cloud sales rose 38% to €3.28 billion in the third quarter, sparking an increase in overall revenue, though rising expenses dragged down profit. Credit: Peter Sayer/IDG Fueled by strong sales of cloud-based software that more than offset a decline in revenue from on-premises applications, SAP revenue jumped in the third quarter compared to the year-earlier period. Total revenue for the quarter ending Sept. 30 was €7.84 billion (US$7.72 billion), up 15%, according to company’s quarterly financial report, released Tuesday. SAP’s cloud and software revenue for the quarter rose 14% to €6.71 billion. Cloud revenue alone rose 38% to €3.28 billion. Revenue for the company’s S/4HANA cloud-based ERP offering, in particular, nearly doubled, rising 98% to €546 million. SAP results benefited from the strong US dollar, as dollar sales were converted to euros—for example, overall revenue growth in constant currency terms, which exclude the effect of currency fluctuations, was 5% rather than the nominal 15%. Nevertheless, the uptick in cloud sales is good news for SAP, since the company has been pushing customers to migrate from its legacy Business Suite 7, which is usually run on-premises, ever since S/4HANA was launched in 2015. Selling cloud software and services is good business for SAP and other software providers, since, among other things, cloud subscriptions provide a more predictable revenue stream than renewals of licenses for on-premises applications. Despite the jump in revenue, SAP posted a 1% dip in operating profit to €1.239 billion due largely to rising costs in areas including research and development, sales and marketing, and the need for more outlay on the maintenance of the company’s cloud services. Licenses for on-premises software declined 38% to €406 million, reflecting customer migration to cloud-based software. Unsurprisingly, the Germany-based software giant was most eager to talk about its success in the cloud. “The trust in SAP is reflected in our accelerating cloud momentum,” said CEO Christian Klein in the company’s earnings press release. “It’s clear that our transformation has reached an important inflection point, paving the way for continued growth in the future.” Despite the negative news on operating profit, investors greeted SAP’s results warmly, with the company’s share price rising $5.69—or 6.25%—to $96.70 in mid-afternoon trading in the US. Like much of the tech sector, SAP is facing headwinds caused by the ripple effects of Russia’s invasion of Ukraine, as well as a bearish economic climate. Hence, the positive news on the company’s cloud business appears to have been enough to inspire confidence in SAP’s overall outlook. SAP has made major headway on its transition from a license- and maintenance-based business to a usage-based, cloud-first company, due in part to a long string of acquisitions in the past decade in addition to the introduction of S/4HANA, which brings the company’s ERP platform to the public cloud of the customer’s choice. However, the company has a long way to go. Just 12% of current and intended SAP ERP users in the US and Europe responding to a recent survey by digital transformation services provider LeanIX have completed the transition to S/4HANA. Another 12% said they have postponed the start of their move to S/4HANA, and 74% of enterprises that were polled are just at the evaluation and planning phase of their ERP migration. Related content news SAP to buy digital adoption specialist WalkMe for $1.5 billion After Signavio and LeanIX, SAP is acquiring the Israeli provider WalkMe to help user companies with their digital transformation. By Martin Bayer Jun 05, 2024 4 mins SAP Mergers and Acquisitions Enterprise Applications feature Is your data ready for AI? CIOs lack answers Many CIOs are skipping the crucial data management step before rushing forward with AI deployments. By Grant Gross Jun 05, 2024 7 mins Master Data Management Artificial Intelligence Data Management feature How H&M integrates tech into its stores The Swedish clothing retailer’s tech department is working beyond agile, in a more modified hybrid structure with both product teams and platform thinking. Here, CDIO Ellen Svanström explains the model that will bring the tech department c By Karin Lindström Jun 05, 2024 6 mins CIO E-commerce Services Retail Industry case study AI is key player in Texas Rangers’ winning formula During their run to win the World Series last year, the Texas Rangers leveraged enormous volumes of data for AI predictions around everything from optimal batting lineups, defensive positioning, and injury prediction. It’s a strategy the club i By Thor Olavsrud Jun 05, 2024 7 mins CIO Predictive Analytics Data Integration PODCASTS VIDEOS RESOURCES EVENTS SUBSCRIBE TO OUR NEWSLETTER From our editors straight to your inbox Get started by entering your email address below. Please enter a valid email address Subscribe