SAP trims full-year revenue estimates, plans to focus on cloud business

Walldorf, Germany headquartered software giant SAP on Monday revised its business outlook for the full 2020 fiscal year as the Covid-19 pandemic continues to affect its business. 

Although the company targets expansion of cloud revenue to  €22 billion in 2025, the year 2020 revenue estimate has been cut down to €8.0 – 8.2 billion non-IFRS (international financial reporting standard) cloud revenue at constant currencies (previously €8.3 – 8.7 billion). Software revenue estimates are down to €23.1 – 23.6 billion cloud and software revenue at constant currencies, which was previously €23.4 – 24.0 billion. Moreover, the total revenue has been cut to €27.2 – 27.8 billion at constant currencies (previously €27.8 – 28.5 billion).

SAP is known for its enterprise resource planning solutions and provides both traditional and cloud computing services. 

For the Q3 2020 earnings for the quarter ended in September, the company said its revenue was down by 4% year-on-year to  €6.53 billion, operating profit fell by 12% to  €1.47 billion and software revenue was down 2% to  €5.54 billion. Software licenses revenue was down 23% year over year to €0.71 billion (IFRS and non-IFRS) and down 19% (non-IFRS at constant currencies), the company said in a statement. 

The only silver lining was the cloud business revenue, which was up 11% at  €1.98 billion. 

“While SAP continues to see robust interest in its solutions to drive digital transformation as customers look to emerge from the crisis with more resilience and agility, lockdowns have been recently re-introduced in some regions and demand recovery has been more muted than expected,” the company said. 

“COVID-19 has created an inflection point for our customers. The move to the cloud combined with a true business transformation has become a must for enterprises, to gain resiliency and position them to emerge stronger out of the crisis. SAP will accelerate growth in the cloud to more than €22 billion in 2025 and expand the share of more predictable revenue to approximately 85%,” Christian Klein, CEO, SAP said in the statement.