On Thursday, SAP (NYSE:SAP) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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The full earnings call is available at https://sap.webcasts.com/starthere.jsp?ei=1759289&tp_key=d5b76dd3fd
Summary
SAP reported a strong start to 2026, with significant growth in cloud revenue, up 27% to nearly 6 billion euros, and an operating profit increase of 24% to 2.9 billion euros.
The company highlighted strategic initiatives in AI and cloud services, including the expansion of their SAP Business AI and the introduction of new AI-driven tools for ERP migrations.
SAP maintained its financial outlook for 2026, despite geopolitical uncertainties, and expects continued market share gains driven by its comprehensive portfolio of cloud solutions.
Operational highlights included significant customer wins across various industries and a successful increase in cloud backlog by 25% to 21.9 billion euros.
Management emphasized the importance of AI in the company’s strategy, noting that while large-scale adoption is still developing, SAP’s domain expertise positions it well for future growth.
Full Transcript
OPERATOR
And answer session. If you would like to ask a question, you may press STAR followed by one on your touchtone telephone. I would now like to turn the conference over to Alexandra Steiger, Global Head of Investor Relations. Please go ahead.
Alexandra Steiger (Global Head of Investor Relations)
Good evening everyone and welcome. Thank you for joining us. With me today are CEO Christian Klein and CFO Dominic Assam. On this call we will discuss SAP’s first quarter 2026 results. You can find the deck supplementing this call as well as our quarterly statement on our investor relations website. During this call we will make forward looking statements which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results and outcomes to differ materially. Additional information regarding these risks and uncertainties may be found in our filings with the SEC, including but not limited to the Risk Factors SECtion of our annual report on Form 20F for 2025. Unless otherwise stated, all numbers on this call are non IFRS and growth rates and percentage point changes are non IFRS year on year at constant currencies. The non IFRS financial measures we provide should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with IFRS. Before I begin, I would like to highlight our upcoming Financial Analyst Conference at SAPPHIRE taking place in Orlando next month. We look forward to seeing you there. For those unable to attend in person, I would like to invite you to join our webcast and with that over to you Christian.
Christian Klein (Chief Executive Officer)
Thank you Alexandra and a warm welcome to everyone joining the call. I’m happy to say that we delivered a strong start to the year. Our Q1 results demonstrate the ongoing momentum across our entire portfolio and the continued success of our strategy. We achieved these results against a shifting macroeconomic environment and while our business is very resilient, we are not completely immune to external dynamics. Uncertainty remains high, just as it does for every company. Still, we keep on delivering quarter by quarter and we are also working on larger announcements for SAP HIRE which will set us up to deliver high value business AI at scale. We look forward to sharing more details with you in Orlando. Let’s begin by looking at our Q1 performance. Our current cloud backlog increased 25% to 21.9 billion euros. Cloud revenue grew 27%, almost crossing the 6 billion euro mark. The strong performance was driven by a 30% acceleration in our cloud ERP suite revenue, bringing total revenue to 9.6 billion euros for the quarter. This was a strong increase of 12% order entry from our Public Cloud solutions accelerated sharply in Q1, continuing the momentum from Q4, public cloud order entry accounted for over 70% of our quarterly volume and with that we keep on gaining market share, especially versus best of breed software vendors. Gartner Research just announced that SAP grew 15 percentage points faster versus the global enterprise applications cloud market in 2025. Our strong top line performance translated directly into our bottom line with an operating margin of 30% up 2.9 percentage points. As a result, our operating profit in Q1 increased by 24% to 2.9 billion euros. Finally, it’s great to see that our growing partner ecosystem performed exceptionally well. Our indirect channel order entry grew significantly faster than our direct channel, accounting for almost 30% of our total order entry. Now let me turn to the broader macro environment. Geopolitical tensions, mainly the conflict in the Middle east, have increased. The war is already having an economic impact in the region and on many energy intensive industries. SAP is of course not completely immune against these disruptions and the economic uncertainty makes it difficult to predict the impact on our total year results. But we have seen many, many times in the past that customers are turning towards SAP in moments like these to invest into the resilience of their business. Our strong portfolio together with our own resilient business model provides a great foundation for SAP in uncertain times. We see this reflected in a very healthy pipeline coverage for 2026. Let’s move on to some great customer wins in Q1. Leading companies from various industries selected Rise with SAP. They included ConocoPhillips in energy, Thales in Defense, Ali Keat in industrial gases and Bristol Myers Grip in biotech. Moreover, PayPal as well as the European division of automaker Hyundai and Swiss automotive supplier Aptif embarked on the wise journey. Our software and cloud offerings also continue to gain traction with an important win at Dfence Co. Deal. Among the net new customers selecting SAP Grow are the superfood brand Oakberry and others Adeso, a leading IT service provider. On the AI and data side, we won Red Bull as well as Carl Zeiss, a global leader in optics and semiconductor manufacturing technology. In addition a leader in building materials, German food company Hoogland and Swedish manufacturer SKF selected SAP Business Data Cloud. We also saw many successful go lives. Samsung Electro Mechanics completed the S4 Hana transformation as part of their RISE journey. Alibaba Cloud and Fonterra, a New Zealand based agribusiness, both completed their transformation journeys with Rise. We are also proud to have supported ExxonMobil with a smooth deployment of their workforce ecosystem project this go live on SAP SuccessFactors now supports more than 60,000 users globally. All of these customer wins demonstrate the confidence in our portfolio. This brings me to the core of our strategy. Business AI There is no doubt that AI will redefine how companies will run in the future. Here are some examples showing how SAP Business AI is already delivering significant value to our customers. At Daimler Trucks North America, SAP Business AI helped transform how the company wins contracts with lead customers. Bid win rates jumped from 10% to more than 40%, delivering a 70 million financial impact within 12 months. Queensland’s Department of Transport and Main Roads uses SAP Business AI to predict road surface issues across 33,000km. Engineers can now run statewide investment optimization in a single day instead of a week. Next to the accelerated speed, this predictive AI use case also generates millions of savings. At German manufacturer Hermann, an AI assistant analyzes complex construction tenders in hours instead of weeks, reducing manual effort by up to 70%. At automotive supplier mature Formpac, the invoicing process was accelerated by more than 9x and product iteration time is now 30% faster. We also see how our AI supports faster and more cost efficient ERP migrations. For example, our partner KPMG uses Joule for consultants to accelerate ERP migrations. Project sprints are now completed up to 20% faster. EY uses SAP generative AI app to accelerate how it delivers SAP transformation projects. AI agents automate key phases from requirements through testing, reducing project delivery timelines by up to 30%. Bosch Digital equipped 1,500 developers with our AI, including SAP tool for developers for their ERP migration. As a result, developer productivity increased by 20% with unit test creation now 15 to 20% faster. All of these AI use cases deliver significant customer value today. At the same time, let’s be honest, large scale adoption of enterprise AI is still in its early stages. Also, we at SAP are learning our lessons every day with our customers about what it truly takes to make business AI work reliably, which is key when you run the world’s most mission critical and complex business processes. Agents organization often don’t have yet the full understanding of business data and processes to deliver highly accurate outcomes. This is needed to deploy at scale and with high accuracy agentic AI use cases in the most mission critical parts of our customers business. But we are learning fast and we are very confident that SAP has compared to many other software companies the right assets to win very deep domain know how about business processes and data as well as enterprise grade governance and security. SAP’s ERP developed over 50 years can also be seen as the institutional brain of every company where data and process domain know how is getting stored. The launch of SAP Business Data Cloud last year was another important step to enable our customers to further expand the SAP Semantical data module to non SAP data. BDC allows our customers to build an end to end data platform which is key for high value AI. At SAP HIRE we plan to announce some fundamental changes to our portfolio to infuse this deep domain know how into SAP’s AI agents and we will govern the agentic AI layer for our customers. This foundational change will enable SAP AI agents at scale to deliver highly accurate results to take actions across end to end processes in a secure manner. So let me address as well a question many of you have in mind. How will the AI transformation impact the financials of our company? First, SAP solutions as the institutional memory of every company will not disappear. On the contrary, we expect to continue to gain market share with our best of suite offering because now more than ever a harmonized data and process layer is key to harnessing the power of AI. With the infusion of AI across our products and migration tools, you will see an increasing share of consumption related cloud revenue in our P and L. But this shift will happen gradually over the next years with the expansion of business AI in our customer base. The good news is that in line with our system of records, the related subscription revenue will not disappear. Also, it is important to highlight that less than 40% of our 2025 cloud revenue was tied to named users. The remaining subscription cloud revenue is priced via non seed based metrics like revenues, memory used and other value related metrics. Let me emphasize once again that the ramp of consumption based cloud revenue will be a gradual evolution and by no means a disruption comparable with the transition from on Prem to the cloud. At our Financial Analyst conference in Orlando, we are going to show you how our AI transformation will expand SAP’s addressable market as well as how both subscription and consumption related cloud revenue will further drive SAP’s growth ambition. Let’s now look at how AI influences the way SAP operates itself. Our internal AI transformation starts with our people and their skills. We are executing comprehensive upskilling programs across the entire organization so every team can confidently apply AI in their day to day work. Our external high wing is highly targeted focusing on recruiting top experts in data and AI. At the same time, AI will help us to run SAP as a company more autonomously in the future. We act as our customer zero using our own AI across engineering support services and go to market with a direct impact on our top and bottom line financials. Let me share with you what we have already achieved with some great examples in our engineering teams. We are using AI to work more efficiently with Joule for ABAP development and by third party tools like Claude Code and GitHub Copilot. We are increasing developer productivity already by over 30% with AI assistance. Our service and support teams are handling significantly higher ticket volumes without a proportional increase in headcount. AI assists 100% of support cases and 20% of our tickets are even resolved by AI fully autonomous. Thanks to these efforts we observed 12% higher productivity in our support function. At SAP, we have more than 80,000 colleagues in services and our consultants save with our AI one day per week by much more efficient system configuration and custom code analysis. This leads as well to faster project delivery and a huge productivity increase for our go to market teams. AI improved our demand generation activities by personalizing and automating outbound campaigns tailored to customer situation. It saved over 83,000 hours and directly influenced the pipeline with additional 50 million euros of value. Even better, it helps us to target the right customers, identifying real pain points early and replacing guesswork with focused engagement up to six times more effectively. As part of our internal transformation, we have communicated a clear goal to achieve a run rate of around 2 billion euros in efficiencies by end of 2028 and we will share further details at our upcoming Financial Analyst Conference. Let me now summarize. We delivered a strong Q1 in a challenging and uncertain business environment. Whenever tensions and crises occur, our software becomes more essential, not optional. This makes us confident for the remaining year. Finally, we are going to make significant progress with business AI in 2026. You will see this come to life at SAP HIRE. With that I hand over to you Dominic.
Dominic Assam (Chief Financial Officer)
Thank you very much Christian and thank you all for joining us this evening. As Christian stated in his opening remarks, 2026 is off to a strong start, supported by healthy current cloud backlog and total revenue growth, continued strength in cloud revenue and strong operating profit performance. These results prove the merits of the strategy we’ve put in place and the cost discipline in managing our business against the backdrop of an increasingly complex and uncertain macroeconomic and geopolitical environment. Now further shaped by the ongoing conflict in the Middle East, SAPPPPPPPPPPPP continues to be a valued partner for organizations of all sizes pursuing end to end digital transformation. And as we look ahead, SAPPPPPPPPPPPP Business AI, the business data cloud as well as the sovereign cloud continue to play an increasingly important role in customer conversations and are becoming more relevant in their decision making and deal activity. We look forward to showcasing the progress we are making across these areas at our upcoming SAPPPPPPPPPPPPPHIRE User Conference in Orlando. Taken together, these results reinforce the trust that leading organizations place in SAPPPPPPPPPPPP as they pursue complex transformation initiatives at speed and at scale. Now let me provide more details around our financial highlights Current cloud backlog reached 21.9 billion euros, up 25% while CCB growth held up remarkably well in Q1, we continue to expect a slight deceleration in this metric over the coming quarters. Shortly after the escalation of the conflict, governments as well as other customers and industries directly affected by the consequences in their supply chains and production facilities reprioritized their activities to what one could characterize as immediate firefighting. Cloud revenue grew by 27%. It was positively impacted by several quarter specific effects as these are unlikely to reoccur. We expect deceleration of cloud revenue growth in the second quarter. Cloud suite revenue increased by 30% in Q1, now accounting for 87% of total revenue. Growth in cloud software licenses revenue decreased by 33%. Finally, total revenue in the first quarter was 9.6 billion euros up 12%. So now let’s take a brief look at our regional performance in the first quarter. SAPPPPPPPPPPPP’s cloud revenue performance was particularly strong in APJ and EMEA and solid in the Americas region. Brazil, France, Germany, India, South Korea, Switzerland and the United Kingdom had outstanding performance while the US were particularly strong. Moving down the income statement, our IFS cloud gross margin in Q1 was 74.6% …
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