SAP Sees Q3 Revenue Decline As Corporates Delay Projects

Software giant SAP on Sunday (Oct. 25) reported total revenue was down 4 percent to 6.54 billion euros ($7.7 billion) for the quarter that ended Sept. 30.

“Lockdowns have been re-introduced in some regions, recovery is uneven and companies are facing more business uncertainty,” the company said. “Consequently, there is greater scrutiny of larger projects.”

“COVID-19 has created an inflection point for our customers,” SAP CEO Christian Klein said in a prepared statement that accompanied the earnings announcement. “The move to the cloud combined with a true business transformation has become a must for enterprises, to gain resiliency and position them to emerge stronger out of the crisis. Together with our customers and partners we will co-innovate and reinvent how businesses run in a digital world. SAP will accelerate growth in the cloud to more than 22 billion euros [$26 billion] in 2025 and expand the share of more predictable revenue to approximately 85 percent.”

SAP Chief Financial Officer Luka Mucic added in the same announcement: “In Q3 we continued to improve our operating margin against a strong prior year comparison amidst a challenging environment. Earnings per share and cash flow grew even more rapidly. This allows us to raise our 2020 free cash flow outlook even beyond the target communicated last November. Our expedited move to the cloud will ensure we continue our path as a cloud growth company while we remain focused on cost efficiency. These actions and our resilient business model position us well to meet our new ambition targets as uncertainty recedes.”

SAP also issued new guidance for the remainder of the fiscal year, which ends Dec. 31.

“While SAP continues to see robust interest in its solutions to drive digital transformation as customers look to emerge from the crisis with more resilience and agility, lockdowns have been recently re-introduced in some regions and demand recovery has been more muted than expected,” the guidance update stated. “Further and for the same reasons, SAP no longer anticipates a meaningful recovery in SAP Concur business travel-related revenues for the remainder of the year 2020.”