SAP is one of the leaders in the SaaS sector, but despite growth in operations and profits, it has also been among the biggest decliners over the last few quarters.
SAP (D1)
Source: xStation5
It is not alone, as this is a phenomenon seen across the entire SaaS industry, where the market still seems unwilling to believe it will not disappear overnight under pressure from AI. Even good results do not help. How did it look this time?
As with ServiceNow, for example, revenue and EPS matter, but they are secondary indicators.
- Revenue: EUR 9.88bn (expected around EUR 9.85bn)
- EPS: EUR 1.59 (expected around EUR 1.75)
- Operating profit: EUR 2.74bn (expected EUR 2.9bn)
For a company with such negative market sentiment, missing expectations would usually result in a steep selloff. What convinced the market to push the stock higher?
The key segment in the current market context is the company’s cloud segment, which is intended to become the company’s main profit engine. Here, investors got what they wanted most. The company not only maintained the pace of order growth, but clearly accelerated it: 26% versus expectations of 24%. This is a straightforward signal that the company’s most promising segment is performing very well.
Outlook
The results and valuation metrics increasingly show that the market clearly overestimated the pressure AI would put on the company, but may have underestimated the costs of transformation and adaptation to the new environment. What position does this put the company in?
- The company moved from high net debt to a net cash position, which is currently around EUR 2.2bn, significantly increasing its financial flexibility. The debt to equity ratio fell to just 0.2.
- Free cash flow remains high and reached around EUR 3.2bn in the last quarter.
- From a fundamental perspective, SAP now has one of the strongest balance sheets in the European technology sector, giving the company significant freedom to finance growth, acquisitions, and shareholder returns, while maintaining a large scale of investment.
- Costs are eating into margins, but the company appears very well prepared for the challenges. Many signs suggest it is better positioned than the market currently prices in.
Intel Surprised the Market. Is the Turnaround Finally Gaining Momentum?
Morning Wrap: Will the market rebound after Thursday's sell-off❓
Stock of the Week: TSMC – The Manufacturing Engine Behind the AI Revolution
US Open: Alphabet and Tesla Weigh on Wall Street, While Oil Prices Renew Investor Concerns
This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.
