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What SAP sells and what drives the business
SAP SE, headquartered in Walldorf, Germany, sells enterprise software used across processes such as finance, procurement, human resources, supply chain, and customer experience. Its strategic direction is toward integrated applications on a cloud platform. For investors, that makes both new customer wins and the ability to expand use among existing customers important operating questions. SAP’s 2025 Form 20-F describes this strategy and the business risks discussed below.
The shift from on-premise software toward cloud subscriptions changes how to read performance. Cloud growth and backlog can indicate demand and future revenue potential, while migration, renewals, and subscription expansion determine whether SAP sustains that progress. A growing backlog is not itself recognized revenue or a guarantee of future growth.
What the latest reported results show
In its July 23, 2026 Q2 and half-year release, SAP reported the following year-over-year results. Reported growth reflects currency movements; constant-currency growth adjusts for them. Compare like with like rather than mixing the two bases. SAP’s Q2 and half-year 2026 results provide the company-reported figures.
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| Measure | Reported result | At constant currencies |
|---|---|---|
| Current cloud backlog | €22.9 billion; up 27% | Up 26% |
| Cloud revenue | Up 22% | Up 24% |
| Cloud ERP Suite revenue | Up 25% | Up 27% |
| Total revenue | Up 9% | Up 11% |
| Operating profit | IFRS: up 8%; non-IFRS: up 7% | Non-IFRS: up 9% |
The pattern is a useful starting point: cloud revenue grew faster than total revenue, and Cloud ERP Suite grew faster than cloud overall. But one quarter cannot establish whether growth is durable. Track backlog growth alongside its conversion into reported revenue, and examine operating profit on both IFRS and clearly labeled non-IFRS bases.
For context, SAP’s 2025 Form 20-F reported FY2025 cloud revenue of €21.02 billion and cloud and software revenue of €32.54 billion. These are annual company figures, not growth rates for Q2 2026.
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How to assess the 2026 outlook
SAP’s 2025 Form 20-F set a 2026 cloud revenue outlook of €25.8–€26.2 billion and a non-IFRS operating profit outlook of €11.9–€12.3 billion. The subsequent Q2 2026 release says the non-IFRS operating-profit outlook was updated to reflect dilution from the Dremio and Prior Labs acquisitions. Do not treat the filing’s original operating-profit range as the latest unchanged guidance; check the Q2 release for the current range before using it in a forecast.
The Form 20-F also said SAP expected current cloud backlog growth to slightly decelerate. Outlook ranges are management expectations, not promised outcomes. Compare later quarterly results with the current guidance, noting changes in currency assumptions, acquisition effects, and the basis used for adjusted profit.
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How to value SAP shares
A valuation needs a share price with a date, currency, and security specified. SAP has Frankfurt ordinary shares and NYSE ADRs; do not treat their quoted prices as interchangeable without accounting for the ADR ratio and currency. The sources cited here do not establish a current quote, market capitalization, or valuation multiple, so they cannot support a conclusion that SAP is undervalued or overvalued.
Choose a consistent earnings or cash-flow basis
- Price-to-earnings (P/E): Relate the share price to earnings per share for a clearly defined period. State whether earnings are IFRS or adjusted, and consider how expected growth and margins support the multiple.
- Free-cash-flow yield: Compare free cash flow with equity value. Examine cash conversion and working-capital effects, and distinguish reported figures from adjusted measures.
- Enterprise-value multiples: These can help compare companies with different debt and cash positions. Use matching reporting periods and accounting definitions.
Test assumptions rather than relying on one estimate
Build scenarios for slower cloud growth, operating-margin delivery, currency movements, and acquisition dilution. Show how each changes the earnings or cash-flow assumptions behind the valuation. Management’s non-IFRS measures can be useful for understanding its guidance, but label them and reconcile them with IFRS results where possible.
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Risks to include in an investment case
SAP’s 2025 Form 20-F identifies risks that can affect performance; these are diligence areas, not predictions that any particular event will occur.
- Cloud execution and customer migration: A shift from on-premise licenses toward subscriptions can affect near-term revenue. Assess whether SAP can move customers successfully while retaining and renewing them.
- Backlog conversion and expansion: Ask whether current cloud backlog converts as expected and whether customers adopt additional modules or capacity.
- Competition and pricing: Competition can pressure market share and profit. Consider established vendors, hyperscalers, and newer entrants when assessing growth and margins.
- Technology, product quality, and integration: Rapid technological change, product defects, or integration problems could affect customer adoption and execution.
- Acquisitions and innovation: Evaluate whether acquisitions and product investments, including AI-related efforts, deliver customer adoption and returns without distracting from core execution.
- Economic, political, and currency conditions: Global economic and political instability, currency movements, and changes in demand—including public-sector demand—can affect results.
Comparing SAP with other software companies
Use the same periods, currency treatment, and accounting definitions for each company. Relevant comparison measures include cloud and total revenue growth, backlog growth and conversion, recurring-revenue mix, IFRS and adjusted operating margins, free-cash-flow conversion, customer retention and expansion, valuation relative to growth, and exposure to currency and cloud competition. A peer comparison is only useful when the underlying measures are comparable.
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What a defensible conclusion requires
Separate the operating thesis from the share-price judgment. The reported results provide evidence of cloud-led growth; a stock recommendation additionally requires a dated quote, consistent earnings or cash-flow estimates, scenario assumptions, and an investor’s time horizon. Without those inputs, the available company disclosures support analysis of SAP’s fundamentals and risks, but not a price-based buy or sell verdict.
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