## SAP Soars on AI Push, Exceeding Earnings Expectations Amid Cloud Growth
SAP SE, the German software giant, has delivered strong earnings results for its latest quarter, exceeding analysts’ expectations. The company’s success can be attributed to its accelerating cloud transformation and strategic integration of artificial intelligence (AI) capabilities.
Wedbush Securities analyst Dan Ives highlighted SAP’s emergence as a key player in the AI revolution, placing it alongside industry titans like NVIDIA Corp and Microsoft Corp. Ives believes SAP’s commitment to AI will be a major driving force behind its continued growth. “SAP is going to be a foundational player,” Ives told CNBC. “I think it’s going to be a huge step in the right direction on cloud checks, actually very strong for SAP.”
SAP’s transition to cloud-based services is gaining momentum, with cloud operations now representing approximately 45% of its business. This figure is projected to reach 70% by the end of next year, signaling a significant shift in the company’s business model. This cloud-focused strategy has positioned SAP to capitalize on the growing demand for AI-driven solutions in the enterprise software market.
“This speaks to the second derivative of the AI revolution,” Ives stated. “It’s not just about NVIDIA and Microsoft, SAP is now joining that AI party.”
The company’s success is driven by the increasing integration of AI into enterprise resource planning (ERP) and logistics software. SAP is now joining a group of leading software companies, including Oracle Corp, Microsoft, and Amazon.com Inc, that are benefitting from this trend. Ives predicts these companies will see “incremental strength from enterprises accelerating AI cloud appointment.”
SAP’s strong performance comes amid a broader industry shift towards AI-powered solutions. Traditional ERP providers like SAP are adapting their offerings to meet the growing demand for intelligent, data-driven solutions. This shift is further highlighted by other major tech companies, including Palantir, IBM, AMD, and Apple, who are also making significant strides in artificial intelligence.
Despite its impressive earnings, SAP is currently facing scrutiny from the Department of Justice. The investigation centers around allegations of overcharging U.S. government agencies for SAP technology. This investigation, which has been ongoing since at least 2022, focuses on potential price-fixing schemes involving $2 billion worth of SAP technology sold to U.S. military and government agencies since 2014.
Financial Highlights:
* SAP reported adjusted earnings of $1.33 per share, beating the consensus estimate of $1.32.
* Quarterly revenue came in at $9.16 billion, slightly below the consensus estimate of $9.17 billion.
Stock Performance:
* SAP SE stock closed at $229.48 on Monday, down 0.42% for the day.
* In after-hours trading, the stock saw a notable increase, rising 3.54%.
* Year to date, SAP has gained 52.77%.
