By Mauro Orru
SAP confirmed its guidance for the year after posting higher revenue and operating profit for the third quarter, led by growth at its core cloud business.
Reporting on a non-IFRS basis, the Walldorf, Germany-based software company said late Wednesday that total revenue climbed to 7.74 billion euros ($8.16 billion) from EUR7.48 billion in last year’s third quarter. Cloud revenue rose to EUR3.47 billion from EUR2.99 billion, but software-licenses revenue fell to EUR335 million from EUR406 million.
SAP is moving away from software-licenses sales to subscription-based cloud services, banking on a more profitable and predictable model based on recurring revenue.
“We accelerated cloud growth across our portfolio and significantly expanded our cloud gross margins,” said Chief Executive Christian Klein.
The company said Brazil, India, and the Netherlands had enjoyed outstanding cloud revenue growth in the quarter, while Canada, China, France, Germany, Japan, and Switzerland also performed particularly well.
Operating profit increased to EUR2.28 billion from EUR2.08 billion, with SAP’s operating margin up to 29.4% from 27.8%.
Analysts had forecast total revenue of EUR7.73 billion and cloud revenue of EUR3.53 billion on operating profit of EUR2.19 billion and a 28.4% operating margin, according to a company-provided consensus on a non-IFRS basis.
SAP, like other European software companies, presents its figures as two sets of numbers. One set is based on the International Financial Reporting Standards–an international accounting method that seeks to provide a global reporting standard–though analysts and investors tend to follow SAP’s non-IFRS numbers. Those figures exclude share-based compensation, restructuring expenses and acquisition-related charges.
For the year, SAP continues to expect non-IFRS operating profit at constant currencies between EUR8.65 billion and EUR8.95 billion, and cloud revenue at constant currencies between EUR14 billion and EUR14.2 billion.
Write to Mauro Orru at [email protected]
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