SAP SE Earnings - Q4 2025 Analysis & Highlights
SAP SE's Q4 2025 earnings call highlighted strong financial performance, exceeding expectations in cloud revenue, operating profit, and free cash flow, driven by significant growth in cloud backlog and the increasing adoption of SAP Business AI and Business Data Cloud. The company also announced a new €10 billion share repurchase program and provided a positive outlook for 2026, emphasizing continued cloud transformation and the strategic importance of AI in driving future growth and efficiency.
Key Financial Results
Q4 2025 was the best bookings quarter of 2025, exceeding expectations.
Total Cloud backlog reached €77 billion, an increase of 30%.
Cloud revenue grew 26% year-on-year in 2025.
Software licenses revenue decreased by 27%.
Total revenue for the full year approached €37 billion, up 11%.
Non-IFRS cloud gross margin for the full year expanded by 1.6 percentage points to 75%.
Cloud gross profit was up 29%.
IFRS operating profit in the fourth quarter increased 27% to €2.6 billion.
Non-IFRS operating profit was up 21%.
IFRS operating profit for the full year increased to €9.8 billion.
Non-IFRS operating profit for the full year increased to €10.4 billion.
IFRS effective tax rate for the full year was 28.5%.
Non-IFRS tax rate was 30.4%, which is below the outlook for approximately 32%.
Free cash flow for the full year was €8.2 billion, at the high end of the revised outlook range of €8 billion to €8.2 billion.
Non-IFRS basic earnings per share in fiscal year 2025 increased by 36% to €6.15.
Business Segment Results
Cloud ERP Suite reinforced its position as a key engine of growth with an increase of 32% in 2025.
Cloud ERP Suite now accounts for 86% of total cloud revenue for the year.
Current cloud backlog reached €21 million, up 25%.
More than two-thirds of Q4 cloud order entry included Business AI, increasing by more than 20 percentage points compared with Q3.
90% of the 50 largest deals in Q4 included AI or SAP Business Data Cloud.
The number of customers using Joule, the AI copilot, grew ninefold over the course of the year.
SAP Business Data Cloud secured around €2 billion in total contract value in less than a year since its launch.
Customers representing 40% of the support revenue base have initiated a move to Cloud ERP using RISE and GROW with SAP offerings.
Public cloud order entry grew more than five times faster than private cloud in 2025, now almost half of the order entry.
Almost two-thirds of deals exceeding €1 million in Q4 involved four or more lines of businesses, a 25 percentage point increase.
Capital Allocation
SAP decided to step up its capital returns with a new two-year share repurchase program of up to €10 billion, scheduled to start in February.
Industry Trends and Dynamics
Customers are facing geopolitical uncertainty and macroeconomic volatility.
There is a growing need for sovereignty and resilience, offering opportunities for vendors that can reduce dependencies from dominant offerings.
The AI market is seeing increased traction, with customers realizing that LLMs alone are not enough and require business data and context for high-value AI use cases.
Data silos are a significant roadblock for AI adoption.
Competitive Landscape
SAP outperformed the cloud market by 10 percentage points in 2025.
SAP is positioned as the largest non-US software and SaaS and PaaS vendor to satisfy the demand for sovereignty.
SAP's strategy of designing a stack not locked into any particular YaaS vendor is valuable.
SAP's Converged Cloud infrastructure provides an option to deploy SaaS and PaaS offerings efficiently in its own data centers.
SAP is winning deals because of AI, not losing them.
Macroeconomic Environment
Geopolitical tensions have led to customers emphasizing Sovereign SASE options.
Geopolitical and trade tensions took a toll on top-line performance in 2025.
Geopolitical tensions also resulted in longer negotiation cycles for deals.
Growth Opportunities and Strategies
SAP aims to leverage AI to make companies more resilient and productive, driving growth and cost efficiencies.
The company's Business Suite provides access to the world's largest volume of business data, enabling unique AI capabilities.
SAP is focused on converting its installed base to the cloud with a multiplier of 2x to 3x, representing a multibillion euro cloud revenue opportunity.
Cloud customers are expanding their SAP footprint across their SAP Business Suite, valuing best-of-suite over best-of-breed in the age of AI.
SAP's mid-market business is growing through its partner-first strategy and expansion of its reseller ecosystem.
SAP is reinventing the user experience with its AI copilot, Joule.
AI agents are being embedded across main business processes to drive efficiency, better decisions, and agility.
SAP is reimagining industry-specific applications with AI to redefine mission-critical parts of industry value chains.
Business Data Cloud (BDC) addresses data silos by bringing together SAP and non-SAP data to enable agentic AI.
SAP is accelerating ERP migration with AI-powered migration toolchains in the RISE journey, reducing costs and accelerating value realization.
SAP is implementing an extensive AI transformation program internally to achieve €2 billion in real cost efficiencies by the end of 2028.
Financial Guidance and Outlook
SAP expects CCB growth to moderate slightly over 2026, but less significantly than in 2025.
Total revenue growth is expected to accelerate.
Operating profit outlook reflects sustained operating discipline, driving the expense to revenue growth ratio towards the lower end of 80% to 90%.
Non-IFRS operating profit growth is expected to be significantly above revenue growth.
Record free cash flow of approximately €10 billion is expected in 2026.
The midterm non-IFRS effective tax rate is expected to be in a range of 28% to 30%.
