SAP SE (NYSE: SAP) reported third-quarter total revenue of €10.27 billion on Oct. 21, the first time the German software maker has crossed €10 billion in a single quarter, as cloud revenue rose 26% to €6.67 billion. Non-IFRS operating profit rose 18% to €3.03 billion, also above €3 billion for the first time, the company said.
SAP also said it now expects 2026 cloud revenue toward the upper end of its €25.8 billion to €26.2 billion range at constant currencies. It kept its forecast for a slight slowdown in current cloud backlog growth this year, with management pointing to economic uncertainty ahead of the fourth quarter, its largest bookings period.
Current cloud backlog, which SAP uses to track contracted cloud revenue due over the next 12 months, reached €24.14 billion, up 28%, or 26% at constant currencies. That matched the constant-currency pace of the second quarter. Cloud ERP Suite revenue rose 29% to €5.92 billion and made up about 89% of cloud revenue.
Chief Executive Christian Klein linked much of the demand to artificial intelligence. "Nine out of 10 of our 50 largest deals included AI and Business Data Cloud," Klein told analysts on a conference call, referring to the company's data platform.
#SAP Says One-Off Catch-Up Added About 1 Point to Cloud Growth
SAP sells enterprise software that companies use to run finance, procurement, HR and supply chains. It is moving customers from installed licenses to cloud subscriptions through its RISE with SAP and GROW with SAP programs.
Part of the quarter's cloud gain was temporary. SAP said growth benefited from quarter-specific effects, mainly a multi-quarter revenue catch-up from customers returning from financial distress. Chief Financial Officer Dominik Asam told analysts these effects added about one percentage point to cloud revenue growth.
Profit growth also had an easier comparison. SAP said operating profit a year earlier carried negative impacts of about €0.1 billion each from a change in case law affecting its other tax litigation and a workforce transformation. The Reltio, Dremio and Prior Labs acquisitions added €49 million to revenue but reduced non-IFRS operating profit by €39 million.
Older revenue lines kept shrinking. Software support revenue fell 5% to €2.43 billion, license revenue fell 9% to €147 million and services revenue fell 4% to €1.02 billion. SAP expects the decline in support revenue to speed up in coming years as more customers move to the cloud.
Cloud gross margin narrowed to 74.3% on a non-IFRS basis from 75.1% a year earlier. Klein told analysts SAP faces higher hardware prices and is investing in software and cloud, and said the company is working on automating its cloud operations to support margins.
#SAP Keeps €10 Billion Free Cash Flow Target as Buyback Reaches €4.2 Billion
Free cash flow rose 36% to €1.72 billion in the quarter, and SAP kept its forecast of about €10 billion for the year. Non-IFRS earnings per share rose 19% to €1.89, while IFRS earnings per share rose 14% to €1.96.
By Sept. 30, SAP had repurchased about €4.2 billion of its shares under a program of up to €10 billion that runs through 2027. It also reaffirmed its 2026 non-IFRS operating profit forecast of €11.8 billion to €12.2 billion at constant currencies, and said it had agreed to acquire TechWolf, which makes AI software for analyzing workforce skills.
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#SAP Flags Fourth-Quarter Bookings Risk Ahead of Planned 2027 Growth Pickup
Asam said the fourth quarter accounts for around half of SAP's annual bookings. "Given the continued political and macroeconomic uncertainty we face today, this could weigh on Q4 bookings and, as a result, our 2027 trajectory," he told analysts, pointing to higher oil prices and U.S. interest rates of 5% or more.
He said the updated guidance implies fourth-quarter cloud revenue growth of around 23% at constant currencies, down from 25% in the third quarter. He attributed part of the slowdown to tougher comparisons, including the anniversary of SAP's SmartRecruiters acquisition.
SAP still plans for constant-currency total revenue growth to accelerate in 2027. Asam said a stronger 2026 raises the bar for that goal, and that services revenue is likely to stay under pressure next year as SAP shifts consultants toward helping customers adopt its AI products.
Management expects 2026 cloud revenue to rise 23% to 25% at constant currencies, near the top of that range, though fourth-quarter bookings, macroeconomic conditions, cloud margin pressure and a shrinking services business remain key risks to the outlook.