SAP Cloud Revenue Rises 25% as Annual Outlook Points to Upper End
Key Facts
SAP's cloud revenue rose 25% at constant currencies in the third quarter of 2026, according to results the company announced on October 21, as it steered its annual outlook toward the upper end of its previous range. Quarterly revenue from the business reached 6,668 million euros, compared with 5,290 million euros in the same period last year. It grew 26% on a reported basis, according to the company's quarterly statement. Group revenue rose to 10,270 million euros from 9,076 million euros, up 13% on a reported basis and 12% at constant currencies. Following the results, SAP's U.S.-listed shares rose about 6% in after-hours trading, according to Reuters coverage published on October 22.
Chief Executive Christian Klein said artificial intelligence was the main driver of customers' shift to the cloud during the quarter, Reuters reported. Klein linked customer investment in cloud infrastructure, data and business AI to adoption of the autonomous enterprise strategy. He added in the company's statement: "Our customers are investing in the technology underpinning it, from the cloud and data foundation to our business AI." According to Investing.com's coverage of the earnings presentation, 9 out of every ten of the company's 50 largest deals during the quarter included AI and Business Data Cloud components. Cloud revenue growth also benefited from the recognition of revenue covering several quarters for customers that had recovered from financial distress, according to the company.
Within the cloud business, Cloud ERP Suite revenue reached 5,924 million euros in the third quarter, according to the official statement. Revenue from the suite was 4,586 million euros in the corresponding period last year. The business posted annual growth of 29% on a reported basis and 28% at constant currencies. By contrast, software license revenue fell to 147 million euros during the quarter, according to the same statement. License revenue had totaled 161 million euros a year earlier, marking an annual decline of 9%.
The results follow cloud revenue growth in the second quarter of 2026 of 22% on a reported basis and 24% at constant currencies, according to SAP's previous quarterly statement. On contracts, current cloud backlog rose to 24,144 million euros in the third quarter. The backlog stood at 18,839 million euros in the same period last year, bringing annual growth to 28% on a reported basis and 26% at constant currencies. The backlog had reached 22,929 million euros in the second quarter, with reported annual growth of 27%. Its constant-currency growth rate held steady at 26% in both quarters, while cloud revenue growth accelerated.
The improvement extended to profitability, with non-IFRS operating profit rising to 3,030 million euros, according to the official earnings presentation. Operating profit on the same basis was 2,566 million euros a year earlier, representing annual growth of 18% on both a reported and constant-currency basis. The operating margin on this measure rose to 29.5%, compared with 28.3% in the corresponding period. Free cash flow also increased 36% to 1,718 million euros from 1,266 million euros a year earlier. Chief Financial Officer Dominik Asam said: "Cost discipline, coupled with continued cloud momentum, demonstrates our ability to grow revenue and profit at the same time."
For 2026, SAP expects cloud revenue near the upper end of its 25.8–26.2 billion euro range at constant currencies. Its combined cloud and software revenue forecast is also moving toward the upper end of its 36.3–36.8 billion euro range on the same basis. The update leaves both previous annual revenue ranges intact while guiding expectations toward their upper ends. The company maintained its annual non-IFRS operating profit forecast at 11.8–12.2 billion euros at constant currencies, according to Reuters. For 2027, SAP expects total revenue growth to accelerate at constant currencies, according to its published investor update.