SAP SE ADS
SAP · NYSE
Next quarter
Expected to report Jan 28, 2027 — estimated from last year’s reporting date.
Consensus is $2.01 EPS for Dec 2026 across 6 estimates, ranging $1.09 to $2.29.
SAP Sep 2026
- 7.39%
- +3.38%
- $2.03
- $2.18
- —
- —
Highlights
- Cloud demand: Current cloud backlog reached €24.1 billion, up 26% year over year and stable versus Q2; cloud revenue was €6.7 billion, up 25% in constant currencies.
- Record revenue: Total revenue crossed €10 billion for the first time, reaching €10.3 billion, up 12%; cloud ERP suite revenue rose 28% and made up 89% of cloud revenue.
- EPS beat: Reported EPS of $2.18 exceeded the $2.03 consensus by 7.39%; SAP separately reported IFRS EPS of €1.96, up 14%, and non-IFRS EPS of €1.89, up 19%.
- Operating profit: Non-IFRS operating profit exceeded €3 billion, up 18%; growth benefited from €100 million of prior-year workforce-transformation charges and €100 million of prior-year tax-litigation impacts.
- Revenue outlook: SAP expects 2026 cloud and cloud-and-software revenue toward the upper end of its previously guided range, while reiterating its current cloud backlog, operating profit and free cash flow outlooks.
- Q4 and 2027 risks: Management still plans to accelerate total revenue growth in 2027 but flagged macro uncertainty and Q4’s importance: the quarter represents around 50% of annual bookings.
- Services transition: Services revenue fell 5% year over year, as SAP shifts billable work toward customer adoption support for recurring cloud, AI and data products; software licenses revenue declined 9%.
- AI adoption: Nine of SAP’s 10 largest deals included AI and Business Data Cloud; the company said Joule Work is available to its 400 million users and reported 20% productivity gains in central functions.
Analysis
SAP delivered a strong Q3, with reported EPS of $2.18 beating the $2.03 consensus by 7.39%. Revenue reached a record €10.3 billion, up 12%, and non-IFRS operating profit rose 18% to more than €3 billion. The cloud-led mix was central to the result: €6.7 billion of cloud revenue grew 25% in constant currencies, while current cloud backlog expanded 26% to €24.1 billion. Backlog growth was stable versus Q2, with management describing organic momentum as slightly better. Cloud revenue growth included about one percentage point from positive one-off effects. Services revenue declined 5%, and software licenses fell 9%.
The quarter also showed SAP’s AI strategy becoming part of its commercial pitch: nine of its 10 largest deals included AI and Business Data Cloud, and management said RISE contracts are increasingly bundling AI, data and platform products. The company expects 2026 cloud and cloud-and-software revenue toward the top of its prior ranges, while reaffirming its other stated outlooks. Its 2027 revenue-acceleration goal remains in place, but Q4 execution is pivotal: it accounts for about half of annual bookings, and SAP cited macro uncertainty as a potential constraint. Management also expects ongoing investment in AI and product development, even as it pursues efficiency gains.
Cloud demand and backlog
The strongest evidence of continued demand was the €24.1 billion current cloud backlog, up 26% year over year. That growth was stable against Q2, with management describing underlying organic growth as slightly accelerated. Cloud revenue reached €6.7 billion, up 25% in constant currencies; positive one-off effects contributed about one percentage point. Cloud ERP suite revenue grew 28% and represented 89% of cloud revenue.
- Deal mix: Nine of SAP’s 10 largest deals included AI and Business Data Cloud, and management said RISE contracts are broadening to include more platform, data and AI products.
- Geography: Cloud performance was particularly strong in EMEA and APJ and solid in the Americas; management described regional AI and data performance as consistent over the past four quarters.
AI product adoption
SAP emphasized that AI is increasingly helping sell cloud migrations and the broader suite, rather than being presented as a standalone feature. Joule Work combines natural-language interaction, shared workspaces and tools to build or adapt agents. SAP said it is available to 400 million users and described an ecosystem of 400 assistants and 3,000 agents. Its Business AI platform offers access to more than 70 models, while Business Data Cloud’s knowledge graph maps more than 7 million fields and 500,000 tables across 400 data products. Management said accuracy and response times still need improvement, but that customer feedback and deal activity have strengthened.
- Customer examples: SAP cited Salling Group’s use of Industry AI to improve time to shelf by up to 66% and cut manual category-management time by up to 70%.
- Competitive positioning: Management highlighted governance and customer control of data, and said Joule in Ariba achieves twice the accuracy of leading frontier models at half the total cost.
Profitability and investment
Non-IFRS operating profit grew 18% to more than €3 billion; IFRS operating profit was €2.9 billion, also up 18%. The comparison benefited from €100 million of prior-year negative impacts related to tax litigation and €100 million from workforce transformation. Non-IFRS cloud gross margin was 74.3%, down 0.7 percentage points year over year. SAP said investment in AI and product development remains substantial and expects to use model selection and automation in cloud operations to support future margins.
- Efficiency ambition: Management said SAP is targeting up to €3 billion of efficiency gains over the next two years and cited approximately 70% more developer code contributions since the start of the year.
- Cost framework: The CFO said SAP remains committed to keeping operating-expense growth, including cost of goods sold, at 80%–90% of top-line growth.
Outlook and execution
SAP expects 2026 cloud and cloud-and-software revenue toward the upper end of its previously guided ranges and reaffirmed its current cloud backlog, operating profit and free cash flow outlooks. The CFO indicated that Q4 cloud revenue growth could be around 23%, citing prior-year comparisons, the fading contribution from SmartRecruiters and the effect of backlog growth. Management maintained its plan to accelerate total revenue growth in 2027, while warning that the goal has become more challenging as Q3 performance raises the comparison base.
- Bookings risk: Q4 represents around 50% of annual bookings. Management flagged geopolitical and macroeconomic uncertainty, including higher oil prices and interest rates, and framed its expectation for slight current cloud backlog growth deceleration as a range rather than a precise target.
- Services strategy: Services revenue declined 5%; SAP plans to keep redirecting some billable work toward cloud and AI adoption support, which management expects to pressure services revenue further while supporting recurring product adoption.
Cash flow and earnings
Free cash flow was €1.7 billion in Q3. Management reiterated its full-year free cash flow outlook of €10 billion, while noting that collections need attention because accounts receivable were higher than it would like. IFRS EPS was €1.96, up 14%, and non-IFRS EPS was €1.89, up 19%. The separately supplied reported-EPS comparison for the ADS was $2.18 versus a $2.03 consensus, a 7.39% beat.
- Other revenue lines: Software licenses revenue declined 9%; the CFO said the transaction business returned to modest year-over-year growth, reducing a drag but not yet providing a growth tailwind.
