SAP Drives Growth With Cloud and AI Transformation

SAP has posted strong third-quarter results, signalling continued momentum in its transition to a cloud-centric business model.

According to its Q3 earnings report, SAP's cloud backlog increases by 23% to €18.84bn, a figure that would be four percentage points higher at constant currencies.

This growth demonstrates sustained customer demand for SAP's cloud offerings.

Cloud revenue experiences a 22% rise to reach €5.29bn, with the Cloud ERP Suite, a core component of SAP's growth strategy, expanding by 26% to €4.59bn.

This points to strong adoption rates for its S/4HANA Cloud and associated solutions.

While there is a notable decline in software licence revenue, this is consistent with SAP's move toward subscription-based services. This strategy lifts the share of more predictable revenue to 87%.

Cloud strategy and financial performance

SAP’s overall revenue sees an increase to €9.08bn, bolstered by this steady cloud performance.

Profitability also sees an uptick. IFRS operating profit grows by 12% to €2.49bn and non-IFRS operating profit rises 14% to €2.57bn.

These figures are achieved despite headwinds of approximately €0.2bn from tax litigation and workforce transformation costs.

The expansion in profit margins could suggest effective cost control and the scalable nature of the cloud business.

Dominik Asam, SAP’s Chief Finance Officer, explains SAP’s performance: “Q3’s strong performance highlights the strength and agility of our model. Through disciplined execution and a sharp focus on profitability and cash flow, we’ve maintained forward momentum despite an uncertain macroeconomic backdrop."

He adds: "We enter Q4 confident in our ability to deliver on our commitments, as reflected by an improved outlook for operating profit and free cash flow.”

Transformation and AI integration

The results align with a company-wide transformation programme announced in January 2024.

This initiative is designed to improve scalability and improve efficiency using AI, with a focus on growth areas such as Business AI.

The programme supports SAP's 2025 targets, which include a non-IFRS operating profit of around €10bn and free cash flow of €8bn.

A share repurchase programme valued at €5bn, completed in August 2025, is another component of SAP's strategy from a traditional enterprise software vendor to a cloud-based subscription business.

Christian Klein, SAP Chief Executive Officer, says: “We are gaining market share as our customers are adopting solutions across the entire Business Suite, including Business Data Cloud and AI at accelerated pace.”

Customer adoption and strategic partnerships

SAP attributes its success to customers adopting its “RISE with SAP” solution for business transformations.

Notable clients who have embarked on this journey include:

• Alphabet
• ANA HOLDINGS
• BarmeniaGothaer
• Computacenter
• Jack Wolfskin
• DXC Technology
• Japan Aviation Electronics Industry
• The Magnum Ice Cream Company

SAP also forges key partnerships to expand its reach.

In September, a collaboration with OpenAI was announced to launch 'OpenAI for Germany', which will combine SAP's enterprise application expertise with OpenAI's AI technology for the German public sector.

Additionally, SAP and Amazon Web Services (AWS) reveal plans to make SAP’s Sovereign Cloud capabilities available on the AWS European Sovereign Cloud, which is supported by a planned €7.8bn investment from Amazon.

These strategic moves and partnerships appear to be reinforcing SAP's market position.

Klein adds: “For Q4 we are executing against a strong pipeline – which gives us confidence in our accelerating total revenue growth ambition for 2026.”