DE40: DE40: DAX gains 2% as SAP shares surge 10% after earnings — the most in 6 years 📈

• European markets gain following Wall Street indices. DE40 is up nearly 2%, and the cash DAX is showing a rise of over 2.7%.
• SAP shares are experiencing the biggest gains among DAX-listed companies and the largest intraday jump since April 24, 2019.
• PMI data from Europe came in mixed – preliminary services in March declined, while manufacturing saw a slight increase.

Sentiment on the German stock market is strongly positive today, with DE40 rising almost 15% from the lows at the beginning of April. The weakest stocks in Germany today are those of defense companies Rheinmetall and Hensoldt, which are falling after the FT reported yesterday that Putin proposed a ceasefire in Ukraine and halting combat along the current front line. The prospect of halting the fighting between Russia and Ukraine may shift the momentum of the defense sector to a downward trend, potentially redirecting investors’ interest to other market sectors. Today, German giant SAP is seeing record gains.

DE40 (Daily Chart)

The DE40 has rebounded sharply from local lows and is testing the EMA50 on the D1 timeframe today (orange line).

Source: xStation5

Euphoria on SAP Shares

Shares of the German tech giant SAP (SAP.DE) are up over 10% today, the largest rise in six years, after the company, Europe's largest firm, reported first-quarter results that exceeded analysts’ expectations – mainly due to its strong cloud business. SAP, which competes with U.S.-based Salesforce, has not been impacted by U.S. trade barriers, and its Q1 results showed resilience amid macroeconomic turbulence.

• Adjusted operating income rose by 58% in constant currencies to €2.5 billion ($2.9 billion). Bloomberg's forecast was €2.24 billion. In March, the company surpassed the market value of Novo Nordisk A/S, LVMH, and Hermes. About 86% of SAP’s sales came from recurring revenue last quarter, which helps protect the company from economic turbulence and fears of a U.S. recession.
• According to Deutsche Bank analysts, clients are turning to SAP with a need to focus on real cost savings, an area where SAP has a clear advantage due to its mission-critical software. As a result, the German company shows strength and resilience despite significant macroeconomic uncertainty.
• Cloud revenue increased by 26% in constant currencies, reaching €4.99 billion, compared with the forecast of €5.05 billion. SAP confirmed its cloud revenue forecast for 2025, ranging from €21.6 billion to €21.9 billion. The company also noted that “the current dynamic situation implies elevated levels of uncertainty and limited visibility for the future.”
• The current cloud backlog, reflecting sales that will be booked in the next 12 months, grew by 29% in constant currencies to €18.2 billion. SAP also decided on a corporate restructuring that included layoffs in the first half of 2024, which helped increase profits. The increase in SAP’s share value coincided with a positive global backdrop after U.S. President Donald Trump suggested he might ease his tough stance on Beijing. A broader Asian equities index rose by more than 1%.

Growth in both the license and cloud subscription businesses slowed in Q1, according to a survey conducted this month by Morgan Stanley analysts among 30 companies using SAP. The slowdown was mainly in the U.S., SAP's largest market. However, the 29% growth in cloud backlog in constant currencies, along with confirmation of its 2025 targets, shows no sign of hindrance from rising uncertainty. SAP’s adjusted operating margin of 27.2%, about 250 basis points above consensus, indicates that its aggressive shift to the cloud over the past 2-3 years is maturing, overshadowing slight sales misses.

Source: xStation5