SAP Faces Contract Delays as Cloud Revenue Growth Slows, Shares Decline

Cloud Revenue Growth Disappoints

SAP’s cloud revenue growth has reportedly fallen short of analyst expectations, with the company acknowledging that customers in manufacturing and public sectors are taking longer to sign contracts. According to the company’s latest financial results, cloud revenue reached €5.29 billion in the third quarter, representing 22 percent year-on-year growth but falling below the €5.33 billion that analysts had projected.

Cloud Revenue Growth Disappoints
Extended Sales Cycles Impact Performance
ERP Remains Core Growth Driver
Pricing Strategy and Market Position
Revised Outlook for 2025

The European software giant now expects full-year sales to be near the lower end of its €21.6-21.9 billion forecast range, sources indicate. Shares were reportedly down 2 percent following the announcement as investors reacted to the slower-than-anticipated cloud revenue growth and revised outlook.

Extended Sales Cycles Impact Performance

CEO Christian Klein told investors that elongated sales cycles and constrained US public sector spending have created challenges, particularly during the first half of the year. “You’re going to miss in the US public sector and also in a few deals in the manufacturing space… it’s hard to catch up,” Klein reportedly stated during the investor call., according to recent studies

Despite these challenges, executives expressed optimism about the company‘s pipeline for the fourth quarter. “Looking at our Q4 pipeline, a lot of these deals [are] now coming back. And that gives us a lot of confidence,” Klein added, according to the conference call transcript.

ERP Remains Core Growth Driver

CFO Dominik Asam emphasized that enterprise resource planning (ERP) continues to be the primary engine of SAP’s growth, despite the company’s expansion into other business applications including HR, CRM, and supply chain management over recent decades. The report states that ERP delivered 31 percent of growth in Q3 and represents 87 percent of cloud revenues.

“It delivered 31 percent of growth in Q3, demonstrating the unabated momentum of strong market share gains in what by now represents 87 percent of cloud revenues and actually more than 100 percent of the year-over-year increase in cloud revenues,” Asam told investors, according to the financial report.

Pricing Strategy and Market Position

Responding to questions about cloud computing pricing, Klein reportedly stated that customers understand they pay a premium for SAP’s ERP platform in the cloud. “This is not only about putting an ERP system on a public cloud infrastructure, in a datacenter… There are sometimes much higher standards [required], which we can fulfill, but customers understand that they have to pay a premium for that,” he explained during the investor call., according to market developments

This statement comes after recent reports from industry analysts suggesting some SAP Cloud ERP Private customers have received renewal proposals with double-digit price increases when failing to negotiate renewal price caps.

Revised Outlook for 2025

Looking ahead to fiscal 2025, Asam indicated that the company’s cloud revenue outlook would now be “toward its lower end [of guidance] due to delayed bookings in the first half of the year.” The CFO noted that this pattern of back-end loaded bookings has continued into the third quarter, particularly affecting industrial manufacturing and public sector segments.

The company’s overall performance metrics showed mixed results, with SAP generating €9.1 billion in global revenue for its calendar Q3, representing a 7 percent year-on-year increase, while operating profit climbed 12 percent to €2.49 billion, according to the financial report.