SAP Shares Stage a Sharp Reversal After Q1 Numbers Crush Estimates

The whiplash was brutal. After getting pummelled on Thursday, SAP shares roared back on Friday, gaining roughly seven percent to trade at 149.76 euros. The trigger? A set of first-quarter results that handily beat consensus across nearly every key metric.

The trouble started a day earlier when ServiceNow tumbled 17 percent after flagging order delays in the Middle East. That contagion dragged SAP down with it, leaving the stock at 140.10 euros — down about six percent on the session and nursing a year-to-date loss of roughly 26 percent. But the quarterly figures released after the US close changed the narrative entirely.

Cloud Engine Fires on All Cylinders

Revenue for the three months ended March rose six percent to 9.6 billion euros. The cloud business, the centrepiece of SAP’s transformation strategy, delivered currency-adjusted growth of 27 percent to 5.96 billion euros, topping the analyst consensus of 5.87 billion. That represented an acceleration from the prior quarter.

Within that, the cloud ERP core unit stood out with a currency-adjusted jump of 30 percent. CEO Christian Klein pointed to new artificial intelligence capabilities as a key driver of the momentum.

The shift to subscriptions continues to reshape the income statement. Traditional software licence and support revenue fell 12 percent, while the standalone licence line dropped 37 percent — an expected but nonetheless stark reminder of the transition underway.

Profitability Breaks Through

The margin story was arguably the most impressive element of the release. Operating profit on a non-IFRS basis climbed 24 percent to 2.87 billion euros, well ahead of the 2.7 billion euros analysts had pencilled in. The operating margin hit exactly 30 percent, up from 27.2 percent a year earlier. Scale benefits and last year’s restructuring programme are clearly feeding through to the bottom line.

The current cloud backlog — the contracted revenue visible over the next twelve months — grew 25 percent on a currency-adjusted basis to 21.9 billion euros. That slightly missed the 24.1 percent growth rate the market had expected, but analysts still took it as a positive signal given what it says about future revenue visibility.

Should investors sell immediately? Or is it worth buying SAP?

Cash Flow Misses on Legal Hit

Not everything sparkled. Free cash flow came in at 3.25 billion euros, below analyst forecasts. The culprit was a one-off charge of roughly 408 million euros tied to a legal dispute with US-based Teradata.

Outlook Unchanged, Dividend Proposed

Management held its full-year guidance steady. For 2026, SAP continues to target cloud revenue between 25.8 billion and 26.2 billion euros, with non-IFRS operating profit in a range of 11.9 billion to 12.3 billion euros. One tweak: the company now expects revenue growth this year to land at a similar level to 2025, walking back an earlier suggestion of acceleration.

The supervisory and executive boards have proposed a dividend of 2.50 euros per share for the 2025 financial year, a 6.4 percent increase from the prior year. Shareholders will vote on the proposal at the annual general meeting on 5 May 2026. The ex-dividend date is 6 May.

The multi-billion-euro share buyback programme continues in parallel. SAP completed the first tranche, worth roughly 2.6 billion euros, by early April.

Analysts Turn Bullish

Despite the stock’s bruising start to the year — it has shed more than 30 percent since January and sits near its 52-week low — several analysts see value. HSBC upgraded its rating to “Buy” with a price target of 182 euros. Morgan Stanley and Deutsche Bank trimmed their targets slightly ahead of the release but maintained their buy recommendations.

The next major catalyst for investors comes on 13 May 2026, when SAP holds its Financial Analyst Conference alongside the Sapphire event in Orlando. That is where management is expected to flesh out the growth trajectory in more detail.