SAP (NYSE:SAP) executives used the company’s fourth-quarter and full-year results conference to emphasize progress against 2025 targets, point to increasing customer interest in AI-enabled offerings, and outline expectations for 2026 amid ongoing geopolitical uncertainty. The company noted that figures discussed were non-IFRS and presented on a year-on-year, constant-currency basis unless otherwise stated.
Management highlights: 2025 execution and a strong Q4
CEO Christian Klein said SAP achieved its outlook for cloud and software in 2025 despite what he described as a “rough start” in the first half, citing geopolitical tensions and challenges closing deals in the public sector. Klein added that SAP “overachieved” relative to its outlook for operating profit and cash flow, attributing the performance to cost discipline, internal process efficiencies, and applying AI across the company.
As part of that effort, Klein pointed to traction in the mid-market through GROW, saying several thousand net-new customers joined over the past years and that the mid-market is now the fastest-growing segment in SAP’s customer base. He also said SAP’s public cloud business grew five times faster than its private cloud business in 2025.
Product strategy and AI: “agents,” Joule, and the Business Data Cloud
Klein said SAP has sharpened its product strategy around a single platform across lines of business, positioning SAP Business Technology Platform (BTP) as the foundation for integration and extensibility and highlighting a business transformation portfolio intended to support process transformation and enterprise architecture work.
A key focus was the Business Data Cloud (BDC), which Klein said generated more than €2 billion of order entry since its launch in January. He framed BDC as strategically important for business AI because it brings SAP and non-SAP data together through a semantic layer.
Klein also argued that SAP’s differentiation in an AI-driven market rests on business data, business processes, and security and trust. He said large language models are strong at handling unstructured data, but enterprise agents need structured business data (such as P&L information, pipeline details, and payment data) to deliver value. He described SAP’s approach as combining “the world’s best LLMs” for different use cases with SAP’s business data and a “knowledge graph” that correlates structured and unstructured information.
Looking forward, Klein laid out five areas where SAP expects to win and accelerate total revenue growth, including user experience improvements through Joule, embedding AI “agents” into core workflows, industry-specific capabilities, expansion of the Business Data Cloud, and using AI to improve ERP migrations through automation of tasks such as data migration, configuration, and testing.
Large deals and examples cited: H&M and Fresenius
To illustrate AI’s role in customer decisions, Klein described a fourth-quarter deal with H&M that followed a year of prototyping to support more personalized shopping experiences. He said SAP worked on AI-enabled capabilities for areas such as returns and claims management, store fulfillment, and supply chain agility, as well as back-office integration into functions like finance. Klein said the deal was driven not just by cloud migration but by “AI embedded in the different parts of our apps.”
Klein also highlighted work with Fresenius and partner Avelios to develop a next-generation patient management solution on SAP’s platform. He said the goal is to improve hospital operations by reducing manual work through AI agents, enabling doctors and nurses to spend more time with patients. Klein said SAP has shown the concept to other healthcare customers and received interest in participating.
Financial results: backlog, revenue growth, margins, cash flow, and capital returns
CFO Dominik Asam said SAP ended 2025 with a “strong close” and “steady execution” against priorities, citing top-line growth alongside profitability and cash flow performance that exceeded expectations.
- Current cloud backlog: €21 billion, up 25%. Asam said the growth rate represented “a more pronounced slowdown than we had anticipated,” attributing it to a deal mix weighted toward larger transformations with longer ramp periods or flexible structures, as well as longer negotiation and deployment timelines for sovereign SaaS options.
- Total cloud backlog: €77 billion, up 30% to a record level.
- Cloud revenue: up 26% in 2025, driven by Cloud ERP Suite.
- Cloud ERP Suite: up 32% in 2025 and representing 86% of total cloud revenue; Asam added that in U.S. dollar terms, this would have been 34%.
- Software licenses revenue: down 27%.
- Total revenue: “approached” €37 billion, up 11%.
- Non-IFRS cloud gross margin: 75% for the full year, up 1.6 percentage points, with cloud gross profit up 29%.
Asam said fourth-quarter IFRS operating profit increased 27% to €2.6 billion, while non-IFRS operating profit rose 21%. He said both IFRS and non-IFRS operating profit were negatively impacted by about €100 million tied to a 2025 workforce transformation, and IFRS operating profit was also negatively impacted by $200 million of Teradata litigation expenses.
For the full year, Asam reported IFRS operating profit of €9.8 billion and non-IFRS operating profit of €10.4 billion. He said the IFRS effective tax rate was 28.5% and the non-IFRS tax rate was 30.4%, below the company’s prior outlook of about 32%, primarily due to an increased ability to offset foreign withholding taxes in Germany. Asam said SAP now expects a midterm non-IFRS effective tax rate of 28% to 30%.
Free cash flow for 2025 was €8.2 billion (rounded down), at the high end of SAP’s revised outlook range. Asam attributed the increase mainly to higher profitability and lower payments to reserves for restructuring and share-based compensation. SAP also announced a new two-year share repurchase program of up to €10 billion, scheduled to start in February. Non-IFRS basic EPS increased 36% to €6.15 for fiscal 2025.
Outlook and Q&A themes: CCB, geopolitics, sovereignty, and AI monetization
For 2026, Asam said SAP expects current cloud backlog growth to “moderate slightly” over the year, with deceleration “meaningfully less” than in 2025. He said SAP sees a path for total revenue growth to accelerate and expects record free cash flow of approximately €10 billion in 2026. He also said SAP is driving its expense-to-revenue growth ratio toward the lower end of its long-term operating leverage objectives of 80%–90%.
During Q&A, management addressed the impact of geopolitics and demand for sovereign solutions. Klein said the U.S. public sector was one of SAP’s best-performing businesses in Q4 and that customers there focus primarily on meeting regulatory standards rather than the vendor’s country of origin. Asam said SAP assumed the 2025 environment as a “new normal” in its guidance but was not planning for “meltdown catastrophe scenarios.”
Management also discussed a 10% intraday share price drop referenced by a questioner, with Klein arguing that SAP’s strategy should not be driven by day-to-day market moves. Asam said SAP’s SaaS and PaaS growth compared favorably to competitors in 2025 when viewed in U.S. dollar terms, citing 30% growth for SAP’s SaaS/PaaS layer.
On CCB, Asam cited three factors behind the growth rate: longer ramps for very large deals (which represented 71% of cloud order entry in Q4 for transactions over €5 million), procurement-related contract terms in certain public-sector contracts that affect what can be included in CCB, and longer deployment timelines linked to sovereign infrastructure alternatives and certification processes.
Finally, Klein said SAP does not break out “AI revenue” because AI is embedded in applications, but said SAP tracks how often AI is part of deals and steers sales teams to sell “the new capabilities with AI” as part of broader solutions rather than as a standalone product.
About SAP (NYSE:SAP)
SAP SE is a global enterprise software company headquartered in Walldorf, Germany. Founded in 1972 by five former IBM engineers, the company’s name is an acronym for Systeme, Anwendungen und Produkte in der Datenverarbeitung (Systems, Applications & Products in Data Processing). SAP develops and sells software and services that help organizations manage business processes across finance, human resources, procurement, manufacturing, supply chain and customer relationships.
SAP’s product portfolio spans on‑premises and cloud offerings, anchored by its enterprise resource planning (ERP) solutions such as SAP S/4HANA and the SAP HANA in‑memory database and platform.
