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1. Company Snapshot

1.a. Company Description

SAP SE, together with its subsidiaries, operates as an enterprise application software company worldwide.The company operates through three segments: Applications, Technology & Support; Qualtrics; and Services.It offers SAP S/4HANA, an ERP suite with intelligent technologies, such as artificial intelligence, machine learning, and advanced analytics; SAP SuccessFactors Human Experience Management provides cloud-based solutions, such as a human resources management system for core HR and payroll, talent management, employee experience management, and people analytics; and intelligent spend management solutions, including products branded under the SAP Ariba, SAP Concur, and SAP Fieldglass names.


The company also provides SAP customer experience solutions; SAP Business Technology platform that enables customers and partners to extend and customize SAP applications in a cloud-native way; and SAP Business Network that enable companies to extend their ecosystem, react to supply chain disruptions, discover new trading partners, and find new opportunities.In addition, it offers business process intelligence solutions aim to help customers analyze their operations, understand their process bottlenecks, and improve their business process landscape; Experience solutions; SAP's industry cloud provides modular solutions addressing industry-specific functions; and SAP's ecosystem build, sell, service, and run SAP solutions and technology, as well as sustainable business solutions, services, and partnerships solutions.SAP SE was founded in 1972 and is headquartered in Walldorf, Germany.

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1.b. Last Insights on SAP

SAP SE's recent performance has been impacted by a revenue miss and weak cloud order backlog, as reported in its Q3 earnings release. The company's cloud expansion and AI-infused product launches have garnered attention, but analysts have adjusted their expectations, citing evolving revenue forecasts and shifting growth drivers. Barclays views the current weakness as an attractive entry point. Despite this, SAP's long-term growth prospects remain intact, driven by cloud ERP growth and strong pipelines. (Source: Barclays, Morgan Stanley)

1.c. Company Highlights

2. SAP's Q3 2025 Earnings: Strong Cloud Revenue Growth and AI-Driven Business Transformation

SAP's Q3 2025 financial results show a robust performance, with total revenue growing 11% to EUR 9.1 billion, driven by strong cloud revenue growth of 27%. The cloud gross margin remained solid at 75%. Operating profit rose 19% to EUR 2.6 billion, and free cash flow increased 5% to EUR 1.3 billion. Earnings per share (EPS) came in at EUR 1.61, beating estimates of EUR 1.51. The company's cloud ERP suite delivered its 15th consecutive quarter of growth exceeding 30%, with a 31% growth in constant currency in Q3.

Publication Date: Oct -24

📋 Highlights
  • Cloud Revenue Growth:: 27% increase with a 75% cloud gross margin.
  • Total Revenue:: EUR 9.1 billion, reflecting 11% year-over-year growth.
  • Cloud Backlog:: EUR 18.8 billion, up 27% year-over-year.
  • Operating Profit:: EUR 2.6 billion, a 19% rise compared to prior year.
  • Free Cash Flow:: EUR 1.3 billion, a 5% increase, with EUR 8.2 billion guidance for 2025.

Cloud Revenue Growth and Backlog

The current cloud backlog increased 27% to EUR 18.8 billion, driven by key customer wins, including Alphabet, Ericsson, Lufthansa, and Syngenta, which have adopted SAP's RISE journey, Business Data Cloud, and AI solutions. SAP's Q4 pipeline looks promising, with coverage appearing strong, and a significant number of deals from the US public sector and manufacturing space that were stalled in the first half of the year now coming back.

AI-Driven Business Transformation

SAP's focus on AI-infused integrated business suite is expected to drive growth through 2027. The company sees a compelling business case for AI use cases, particularly in cost optimization with AI, and has seen a 300% rise in Joule for developer adoption over the last three months. AI attach rates on new deals are trending upwards, with some customers accelerating their transformation plans.

Valuation and Outlook

With a P/E Ratio of 41.63 and an EV/EBITDA of 24.47, the market appears to be pricing in SAP's strong growth prospects. Analysts estimate next year's revenue growth at 10.8%. SAP's confidence in revenue acceleration for next year stems from its adjusted cloud revenue guidance, which is expected to be around the mid-20s level, plus or minus. The company's strong pipeline and Business Cloud strategy position it well for future growth.

Competitive Position and Strategy

SAP's focus on value creation at the upper part of the stack, particularly with its Business Cloud strategy, positions it well versus Oracle. The company's approach involves using large language models (LLMs) like OpenAI, not training them, and collaborating with LLM providers to infuse AI into their technical stack. This winning formula combines their AI foundation, high-quality data from applications, and LLMs to provide more value to customers.

3. NewsRoom

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FLYR Appoints Andy Kidd as Chief Commercial Officer

Dec -04

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SAP SE (SAP): A Bull Case Theory

Dec -04

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Al-Futtaim and SNP achieve seamless S/4HANA conversion in record time

Dec -04

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Is Palantir's Deal With Nvidia a Game Changer?

Dec -04

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OMP's AI-driven Unison Planning(TM) Platform Enhances Supply Chain Agility for McCormick & Co.

Dec -03

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Rimini Street Launches Rimini Agentic UX™ to Bring Agentic AI Innovation to ERP Processes

Dec -03

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Global HR Agent G-P Gia™ Now Available on SAP® Store

Dec -03

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Daikin Leverages DataXstream’s OMS+ to Take Customer Experience to New Heights

Dec -02

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.50%)

6. Segments

Applications, Technology & Services

Expected Growth: 10.5%

SAP SE's growth is driven by increasing demand for digital transformation, cloud-based services, and the need for businesses to streamline operations and improve customer experiences.

7. Detailed Products

SAP S/4HANA

SAP S/4HANA is an enterprise resource planning (ERP) software that provides a comprehensive suite of business applications, including finance, human resources, supply chain, and customer relationship management.

SAP CRM

SAP CRM (Customer Relationship Management) is a software solution that helps businesses manage their customer interactions, sales, marketing, and customer service activities.

SAP ERP

SAP ERP (Enterprise Resource Planning) is a software solution that provides a comprehensive suite of business applications, including finance, human resources, supply chain, and manufacturing.

SAP HANA

SAP HANA is an in-memory relational database management system that provides real-time data processing and analytics capabilities.

SAP Ariba

SAP Ariba is a business network and software solution that enables companies to manage their procurement, invoicing, and payment processes.

SAP Concur

SAP Concur is a software solution that provides travel, expense, and invoice management capabilities.

SAP SuccessFactors

SAP SuccessFactors is a cloud-based human capital management (HCM) software solution that provides capabilities for talent management, HR, and analytics.

SAP Cloud for Customer

SAP Cloud for Customer is a cloud-based customer relationship management (CRM) software solution that provides capabilities for sales, service, and marketing.

8. SAP SE's Porter Forces

Forces Ranking

Threat Of Substitutes

SAP SE operates in the enterprise software market, which has a moderate threat of substitutes. While there are alternative software solutions available, such as Oracle and Microsoft Dynamics, SAP's comprehensive suite of integrated software solutions and strong brand reputation make it a leader in the market, reducing the threat of substitutes.

Bargaining Power Of Customers

SAP SE's customers are typically large enterprises with complex software needs. While they may have some bargaining power due to their size, SAP's software solutions are often critical to their operations, reducing their ability to negotiate significantly. Additionally, SAP's strong brand reputation and comprehensive software suite make it a trusted partner for many customers.

Bargaining Power Of Suppliers

SAP SE's suppliers are typically software developers, consultants, and hardware providers. While some suppliers may have some bargaining power, SAP's large size and market dominance give it significant negotiating power with its suppliers. Additionally, SAP's strategic partnerships with suppliers, such as its partnership with Google Cloud, further reduce supplier bargaining power.

Threat Of New Entrants

The enterprise software market has high barriers to entry, including significant research and development costs, complex software development requirements, and established relationships between software vendors and customers. These barriers make it difficult for new entrants to compete with established players like SAP SE.

Intensity Of Rivalry

The enterprise software market is highly competitive, with established players like Oracle, Microsoft Dynamics, and Salesforce competing with SAP SE. The market is also characterized by a large number of niche players and new entrants, which adds to the competitive intensity. However, SAP's strong brand reputation, comprehensive software suite, and significant market share make it a leader in the market.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 18.99%
Debt Cost 14.64%
Equity Weight 81.01%
Equity Cost 8.98%
WACC 10.06%
Leverage 23.44%

11. Quality Control: SAP SE passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Asseco Business Solutions

A-Score: 6.8/10

Value: 2.1

Growth: 7.1

Quality: 8.2

Yield: 7.5

Momentum: 9.5

Volatility: 6.3

1-Year Total Return ->

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Asseco SEE

A-Score: 5.8/10

Value: 4.1

Growth: 6.7

Quality: 6.9

Yield: 4.4

Momentum: 9.0

Volatility: 4.0

1-Year Total Return ->

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Linedata Services

A-Score: 5.6/10

Value: 7.7

Growth: 6.4

Quality: 7.1

Yield: 5.6

Momentum: 0.5

Volatility: 6.3

1-Year Total Return ->

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MIND C.T.I.

A-Score: 5.5/10

Value: 7.9

Growth: 1.9

Quality: 8.2

Yield: 10.0

Momentum: 0.0

Volatility: 5.0

1-Year Total Return ->

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SAP

A-Score: 4.7/10

Value: 1.1

Growth: 4.2

Quality: 8.1

Yield: 1.9

Momentum: 6.0

Volatility: 6.7

1-Year Total Return ->

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Dassault Systèmes

A-Score: 4.2/10

Value: 2.0

Growth: 6.4

Quality: 8.0

Yield: 1.2

Momentum: 1.5

Volatility: 6.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

210.55$

Current Price

210.55$

Potential

-0.00%

Expected Cash-Flows