SAP, the German multinational software corporation, reported a surge in its Q3 earnings on Thursday, with shares climbing by 6.4% to EUR 128.84. The company attributed this growth primarily to the robust performance of its core cloud business.
Total revenue for the quarter rose to 7.74 billion euros ($8.16 billion), exceeding last year's figure of EUR 7.48 billion and surpassing analysts' forecast of EUR 7.73 billion for the same period. The cloud business played a significant role in this increase, contributing EUR 3.47 billion, up from EUR 2.99 billion in the previous year.
Simultaneously, software license revenue experienced a decline, falling from EUR 406 million to EUR 335 million. This shift is part of SAP's strategic transition towards subscription-based cloud services, a move aimed at establishing a more profitable and predictable revenue model.
The company reported that predictable revenue now accounts for 82% of the total, marking a 2% YoY increase. CEO Christian Klein highlighted the accelerated growth in the cloud sector and expanding gross margins across their portfolio as key drivers behind these numbers.
Several international markets including Brazil, India, and the Netherlands reported remarkable cloud revenue growth. Other countries such as Canada, China, France, Germany, Japan, and Switzerland also demonstrated strong performance.
The company's operating margin increased to 29.4%, up from 27.8%. SAP provides its financial figures on both an IFRS and non-IFRS basis, with the latter excluding certain charges.
In terms of real-time metrics, SAP's Market Cap stands at an impressive 156640.34M USD, and it's trading at a P/E Ratio of 28.96, according to InvestingPro data. The company has also showcased a strong Revenue Growth of 10.69% in LTM2023.Q2, with Gross Profit Margin standing at 71.29%.
InvestingPro Tips highlights that SAP has raised its dividend for 9 consecutive years and has maintained dividend payments for 32 consecutive years, reflecting a solid track record of rewarding its shareholders. The company also operates with a moderate level of debt, which is a positive sign for investors. However, it's worth noting that the stock is trading at a high earnings multiple and near its 52-week high, suggesting a high valuation.
Looking ahead, SAP expects non-IFRS operating profit at constant currencies to fall between EUR 8.65 billion and EUR 8.95 billion for the year-end figures. Additionally, it anticipates cloud revenue to range between EUR14 billion and EUR14.2 billion. This is in line with InvestingPro's tip that analysts predict the company will be profitable this year. For more insightful tips and metrics, consider exploring the InvestingPro product that includes additional tips.
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