SAP cloud sales rose 38% to €3.28 billion in the third quarter, sparking an increase in overall revenue, though rising expenses dragged down profit. Credit: Peter Sayer/IDG Fueled by strong sales of cloud-based software that more than offset a decline in revenue from on-premises applications, SAP revenue jumped in the third quarter compared to the year-earlier period. Total revenue for the quarter ending Sept. 30 was €7.84 billion (US$7.72 billion), up 15%, according to company’s quarterly financial report, released Tuesday. SAP’s cloud and software revenue for the quarter rose 14% to €6.71 billion. Cloud revenue alone rose 38% to €3.28 billion. Revenue for the company’s S/4HANA cloud-based ERP offering, in particular, nearly doubled, rising 98% to €546 million. SAP results benefited from the strong US dollar, as dollar sales were converted to euros—for example, overall revenue growth in constant currency terms, which exclude the effect of currency fluctuations, was 5% rather than the nominal 15%. Nevertheless, the uptick in cloud sales is good news for SAP, since the company has been pushing customers to migrate from its legacy Business Suite 7, which is usually run on-premises, ever since S/4HANA was launched in 2015. Selling cloud software and services is good business for SAP and other software providers, since, among other things, cloud subscriptions provide a more predictable revenue stream than renewals of licenses for on-premises applications. Despite the jump in revenue, SAP posted a 1% dip in operating profit to €1.239 billion due largely to rising costs in areas including research and development, sales and marketing, and the need for more outlay on the maintenance of the company’s cloud services. Licenses for on-premises software declined 38% to €406 million, reflecting customer migration to cloud-based software. Unsurprisingly, the Germany-based software giant was most eager to talk about its success in the cloud. “The trust in SAP is reflected in our accelerating cloud momentum,” said CEO Christian Klein in the company’s earnings press release. “It’s clear that our transformation has reached an important inflection point, paving the way for continued growth in the future.” Despite the negative news on operating profit, investors greeted SAP’s results warmly, with the company’s share price rising $5.69—or 6.25%—to $96.70 in mid-afternoon trading in the US. Like much of the tech sector, SAP is facing headwinds caused by the ripple effects of Russia’s invasion of Ukraine, as well as a bearish economic climate. Hence, the positive news on the company’s cloud business appears to have been enough to inspire confidence in SAP’s overall outlook. SAP has made major headway on its transition from a license- and maintenance-based business to a usage-based, cloud-first company, due in part to a long string of acquisitions in the past decade in addition to the introduction of S/4HANA, which brings the company’s ERP platform to the public cloud of the customer’s choice. However, the company has a long way to go. Just 12% of current and intended SAP ERP users in the US and Europe responding to a recent survey by digital transformation services provider LeanIX have completed the transition to S/4HANA. Another 12% said they have postponed the start of their move to S/4HANA, and 74% of enterprises that were polled are just at the evaluation and planning phase of their ERP migration. Related content brandpost Sponsored by HP How managed device services enable the inclusion of sustainability principles into IT Find out how to Improve resiliency, reduce costs and create better experiences, with the HP-sponsored IDC whitepaper on the benefits of managed device services. By Sherry Brecher May 24, 2024 3 mins Green IT brandpost Sponsored by HP Monitoring the surface of the sun with NASA’s Solar Dynamics Observatory NASA and its contractors are increasingly turning to AI as a reliable way to collect and analyze data. Find out how Z by HP has enabled them to transform the way they analyze data. By Sherry Brecher May 24, 2024 3 mins Artificial Intelligence brandpost Sponsored by HP Designing employee communication for the modern office Three keys to ensure collaboration, productivity, and connection. By Sherry Brecher May 24, 2024 2 mins Employee Experience brandpost Sponsored by HP How to implement zero trust device security Improve cybersecurity posture and build a foundation for corporate-wide trusted digital workspaces, with HP Anyware’s Zero Trust device security. By CIO May 24, 2024 3 mins Endpoint Protection PODCASTS VIDEOS RESOURCES EVENTS SUBSCRIBE TO OUR NEWSLETTER From our editors straight to your inbox Get started by entering your email address below. Please enter a valid email address Subscribe