Cloud revenue soars 40% SAP manages to beat Wall Street earnings forecasts

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Source: siliconANGLE

SAP today reported second-quarter revenue and profit that beat Wall Street's previous expectations, thanks to strong growth in cloud services.

SAP is Europe's most valuable technology company, with revenues up 10 percent at constant exchange rates to €6 billion (about $6.96 billion). Analysts surveyed by Bloomberg were expecting 5.88 billion euros. SAP also beat analysts' average sales expectations in a Reuters poll, with operating profit up 13 percent to 1.04 billion euros.

But sales in SAP's traditional software licensing division fell 5 percent to €996 million, which somewhat put a dent in SAP's earnings, with SAP shares sliding nearly 4 percent at one point. But the decline in on-premise software sales was only brushed aside on the SAP earnings call, which focused on the transition to a cloud subscription model.

SAP is benefiting from driving the transformation. In the second quarter, SAP Cloud Division revenues (in constant currency) grew by a respectable 40 percent to €1.23 billion. New booking revenue was a key indicator of the good performance of the cloud business, which climbed 29% to €421 million.

SAP's growth is driven by two software-as-a-service suites built on the HANA in-memory database. One of the earlier and most profitable products to launch is S/4HANA, a collection of so-called enterprise resource planning applications for managing back-office operations such as billing. In the second quarter, S/4HANA's user base grew to more than 8,900 enterprise organizations, a 41 percent increase year-over-year.

The other was the C/4HANA customer relationship management product package, a new addition to SAP's existing customer experience business, which grew 65 percent in the second quarter on revenue of €242 million.

Even though C/4HANA was officially launched only six weeks ago, SAP CEO Bill McDermott called the suite a game changer during the earnings call. "We're taking the market by storm," he continued, predicting triple-digit growth in sap crm revenue.

SAP has raised its full-year profit and sales guidance by 0.5 percentage points. SAP expects cloud revenue to grow 34%-38%, compared to previous expectations of 31%-36.5%.

In a statement, McDermott added, "The fourth generation of enterprise applications has taken another big step toward C/4HANA. Coupled with S/4HANA, SAP customers are finally able to focus their entire business on delivering a personalized experience to their customers. SAP has set out a clear strategy, which customers have validated in the second quarter, and we are raising our revenue guidance as an indication of a new wave of growth. "


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