[SAP] SAP: Q3 2026 Earnings Preview as Cloud Backlog Outruns Profit Growth

SAP is one of the world's largest enterprise software companies. It sells the core systems that run a company's finance, procurement, human resources and supply chain, and cloud subscriptions already supplied 57% of its revenue in 2025[1]. For readers tracking SAP Q3 2026 earnings, the company has an earnings call scheduled for 2026-10-21 to report the third quarter of 2026, ending September 30, 2026[2]. The latest disclosed period is the second quarter of 2026: total revenue was €9,878 million, up 9% (11% at constant currencies), cloud revenue was €6,281 million, up 24% at constant currencies, and the current cloud backlog (CCB), the contracted cloud revenue due over the next 12 months, was €22,929 million, up 26% at constant currencies, while non-IFRS operating profit was €2,743 million, up only 9% at constant currencies, and free cash flow was €3,002 million, up 27%[3]. SAP gives no quarterly guidance, so the firmest anchor is the full-year outlook updated on July 23: cloud revenue of €25.8 billion to €26.2 billion at constant currencies (up 23% to 25%), cloud and software revenue of €36.3 billion to €36.8 billion (up 12% to 13%), non-IFRS operating profit lowered from €11.9 billion–€12.3 billion to €11.8 billion–€12.2 billion (up 13% to 17%), and free cash flow of about €10 billion; the company also estimates that, at June 30 exchange rates, currency will add 1.5 percentage points to third-quarter cloud revenue growth and have no effect on operating profit growth[4]. On the analyst side, MarketScreener's compiled third-quarter estimates are total revenue of €10,084 million and EBIT of €2,962 million, an EBIT measure that corresponds to the company's non-IFRS operating profit[5].

Three things deserve attention in this third-quarter report. The first is where constant-currency cloud revenue growth lands: it was 27% in the first quarter[6] and 24% in the second, and subtracting first-half actuals from the full-year outlook leaves implied second-half growth of only about 20% to 24%[7], which means the guidance itself assumes further slowing, while CCB growth recovered to 26% in the second quarter, so the third quarter tests whether orders are turning into revenue. The second is the decline in software support revenue: customers who move to the cloud stop paying maintenance, this revenue fell 7% at constant currencies in the second quarter, and the €1,151 million year-over-year increase in cloud revenue was about 4.3 times the €265 million decline in support and licenses, so the third quarter shows whether that coverage narrows. The third is whether profit growth returns to the pace the full-year outlook requires: in the second quarter research and development expense rose 14% and cost of cloud rose 25%, both faster than the 9% increase in total revenue[8], management described this as one-time investment ahead of the third-quarter launch of its AI platform[9], and the full-year outlook needs second-half non-IFRS operating profit to grow about 10% to 18% at constant currencies, so the third quarter shows whether that investment has faded.

Company Background and Business Structure

For more than fifty years SAP has sold the bookkeeping and process backbone of the enterprise. The company was founded in 1972, is headquartered in Walldorf, Germany, carries the legal name SAP SE, has ordinary shares listed in Frankfurt and American depositary receipts traded on the New York Stock Exchange, and is one of the largest companies in the DAX by market value; it employed more than 110,000 people at the end of 2025[10] and 112,019 full-time equivalents at the end of June 2026[11]. Its products cover core business systems such as finance, procurement, human resources, supply chain and customer experience, and the daily processes and data of large enterprises have run on those systems for a long time.

SAP reports four types of revenue, and cloud revenue is already the largest. Cloud revenue was €21,023 million in 2025, or 57% of total revenue, and consists of subscription fees recognized over time; Cloud ERP Suite accounted for €18,119 million of it, and the rest came from Extension Suite and the IaaS business that the company is deliberately shrinking. Software support revenue was €10,525 million and is the annual maintenance paid by on-premise customers; software license revenue was €990 million and is a one-time sale; services revenue was €4,262 million and comes from consulting, premium support and training[1].

Customers buy the cloud through two routes, and after signing, revenue is released over time while cash is mostly collected in advance. Installed-base customers take RISE with SAP, which moves them from legacy ERP systems to SAP Business Suite; new customers take SAP GROW, which covers companies from below €50 million to above €1 billion in annual revenue[12]. A signed subscription enters the cloud backlog and is recognized as revenue over its term, and amounts collected in advance are first recorded as contract liabilities, which stood at €9,843 million at the end of June 2026, above the €6,581 million at the end of 2025[13]. The cloud products run in SAP's own and co-located data centers and on hyperscaler infrastructure, which is the bulk of cloud cost, and the annual report lists cost increases and margin effects from scaling that infrastructure as a risk[14]; beyond direct sales, management says order entry through the indirect channel is growing faster[15].

SAP has only two reportable segments, and Europe and the Americas make up most of its revenue by region. At the end of 2025 the two reportable segments were Applications, Technology & Support (ATS) and Core Services[16], and the ATS segment recorded 2025 revenue of €32,847 million and segment profit of €13,345 million[17]. By region, second-quarter 2026 revenue was €4,603 million in EMEA (including €1,560 million in Germany), €3,881 million in the Americas (including €3,037 million in the United States) and €1,394 million in Asia Pacific Japan[18].

Financial History and Current Position

SAP's total revenue has grown steadily over the past three years, and underneath it cloud revenue is replacing legacy revenue. Total revenue was €31,207 million in 2023 and €34,176 million in 2024[19], then €36,800 million in 2025, up 8%, or 11% at constant currencies[20]. In 2025 cloud revenue was €21,023 million, up 23%, software support was €10,525 million, down 7%, software licenses were €990 million, down 29%, and the total cloud backlog at year end was €77.29 billion, up 22%[1]; at the same date the CCB was €21.05 billion, its constant-currency growth slowed from 29% in 2024 to 25%, and the company acknowledged in its annual report that the slowdown was "more pronounced" than anticipated[21].

The jump in 2025 profit and cash flow came mainly from the end of the restructuring rather than from revenue growth alone. The 2024 restructuring program booked €3,144 million of expense in that year and only €3 million in 2025; IFRS operating profit rose to €9,617 million in 2025, the operating margin was 26.1%, up 12.5 percentage points, and share-based compensation expense fell from €2,385 million to €1,695 million[22], while non-IFRS operating profit for the year was €10.42 billion[4]. Operating cash flow was €9,156 million in 2025 and free cash flow was €8,239 million, above the €4,222 million of 2024, mainly because restructuring payments fell from €2.5 billion to €0.8 billion while profit rose and collections improved[23].

In the latest period, the second quarter of 2026, revenue kept growing at a double-digit constant-currency rate but margins fell year over year. Second-quarter total revenue was €9,878 million, up 9% (11% at constant currencies), cloud revenue was €6,281 million, up 22% (24% at constant currencies), and software support was €2,439 million, down 8%; IFRS operating profit was €2,643 million, up 8%, non-IFRS operating profit was €2,743 million, up 7% (9% at constant currencies), the non-IFRS operating margin was 27.8%, down 0.7 percentage points, the non-IFRS cloud gross margin was 74.6%, down 0.6 percentage points, and free cash flow was €3,002 million, up 27%[3]. IFRS earnings per share were €1.89, up 30%, including €463 million of gains on equity investments, and non-IFRS earnings per share were €1.59, up 6%[24]. For the first half of 2026, total revenue was €19,432 million, non-IFRS operating profit was €5,609 million, up 16% at constant currencies, and free cash flow was €6,250 million[25].

SAP's balance sheet became heavier in the first half of 2026 because of acquisitions and buybacks, but cash and financial debt are roughly equal. Cash and cash equivalents were €10,511 million at the end of June and total financial liabilities were about €10.5 billion[13], including a €3.5 billion Eurobond issued in May whose uses include financing recently announced acquisitions[26]. Under the €10 billion share repurchase program that runs to the end of 2027, the company had bought back about €2.6 billion by the end of June[27], and it also paid €2,883 million in dividends in the first half[28].

Operating Model

SAP's revenue growth is a net figure: the cloud increase minus the decline in legacy revenue. Total revenue is the sum of cloud, software support, software licenses and services; cloud revenue roughly equals the release of the opening cloud backlog over the following four quarters, plus the portion of new contracts recognized in the period, minus cancellations and downsizing, and Cloud ERP Suite is about 88% of it, driven by installed-base customers migrating through RISE with SAP and new customers signing through SAP GROW. The CCB is defined as the contractually committed cloud revenue the company expects to recognize over the upcoming 12 months as of a key date[29], so it leads cloud revenue by about one to four quarters: when new signings slow or large deals ramp revenue later, CCB growth falls first and cloud revenue growth follows. Every installed-base customer that migrates ends one annual maintenance payment, and in the second quarter of 2026 cloud revenue rose €1,151 million year over year while software support fell €203 million and software licenses fell €63 million; services revenue, about 10% of the total, moves with implementation projects and has declined slightly in recent quarters because the company deliberately hands implementation to partners.

Profit depends on expenses growing more slowly than revenue, and in the second quarter taken alone that condition did not hold. Non-IFRS operating profit equals total revenue minus cost of cloud, cost of software and services, research and development, sales and marketing, and administration; it includes share-based compensation and excludes only acquisition-related charges, restructuring and the Teradata litigation. The cloud gross margin, 74.6% on a non-IFRS basis in the second quarter, depends on how fast data center and hyperscaler infrastructure costs grow relative to cloud revenue, while software support carries a higher gross margin but is fading and services carry the lowest. The company's operating leverage framework is for total expenses to grow at 80% to 90% of total revenue growth; in the first half of 2026 expenses rose 6% against revenue growth of 8%, so the framework held on a half-year basis, but in the second quarter research and development rose 14% and cost of cloud rose 25%, both faster than the 9% increase in total revenue. Share-based compensation is revalued with the share price and was €753 million in the first half against €949 million a year earlier[30], which makes it a noise term in profit growth.

Cash flow is concentrated in the first half because cloud subscriptions and maintenance are mostly billed in advance early in the year. Free cash flow equals operating cash flow minus net capital expenditure and lease payments, and in the first half of 2026 operating cash flow was €6,666 million, free cash flow was €6,250 million, capital expenditure was €354 million and lease payments were €117 million[31]; over the same period contract liabilities increased by €2,990 million, cash taxes were €1,376 million (€911 million a year earlier), and the company paid €408 million in the first quarter to settle the Teradata litigation[32]. The cash went to €2,883 million of dividends, €2,600 million of buybacks and €991 million of net acquisition spending, mainly Reltio, in the first half, alongside the €3.5 billion bond issue. Subtracting the first-half €6,250 million from the full-year free cash flow outlook of about €10 billion leaves roughly €3.75 billion for the second half, against €2,300 million in the second half of 2025; this is arithmetic on the company's figures, not a projection.

Industry and Competitive Position

SAP's moat is its installed base, and the threats come from competition during the migration window and from a shift in where AI meets the user. The core processes and data of large enterprises already run on its systems, and its own cloud remains the first choice when they migrate, but the annual report states the risk directly: price pressure, cost increases and loss of market share to traditional, new and cooperating competitors and hyperscalers, along with the possibility that the company cannot achieve its planned margin increase on time[33]. The annual report also acknowledges that business process execution is shifting from individual applications to an agentic AI layer that becomes the new user experience[34]; SAP's response is its AI-First, Suite-First strategy, with Joule as the unified entry point and Business Data Cloud as the data foundation, and in 2026 it acquired Reltio, Dremio and Prior Labs to add master data management, data lakehouse and tabular foundation model capabilities.

The available material does not support a market-share comparison between SAP and its rivals, so its competitive position can be judged only through indirect indicators. Outside commentators often set SAP against Oracle Fusion and Microsoft Dynamics 365 and Copilot, but those are the commentators' comparisons, not share data disclosed by SAP. The company does not disclose customer counts, retention rates, cloud gross margin by product, separate revenue from AI products or the gross margin of software support, so whether migration erodes profit and whether AI already produces revenue can be answered only indirectly through measures such as CCB growth, Cloud ERP Suite growth and the cloud gross margin; after the acquisitions are consolidated, organic growth also depends on whether the company keeps disclosing each acquired company's contribution separately.

Core Debates

SAP's contracted cloud backlog is still growing 26%. Can third-quarter cloud revenue keep pace rather than slow for a third straight quarter?

This debate matters because cloud revenue is SAP's only large revenue line that is growing, and its leading indicator already slowed once in 2025. Constant-currency CCB growth dropped from 29% to 25% in 2025[21], and in its April 2026 outlook the company therefore replaced its earlier assumption that total revenue growth would accelerate through 2027 with growth in 2026 at a level similar to 2025 and acceleration in 2027[35]. Constant-currency cloud revenue growth was 27% in the first quarter and 24% in the second, while the full-year outlook implies only about 20% to 24% for the second half, so the guidance itself assumes further slowing in the second half and the open question is which end of that range the slowdown reaches.

Second-quarter order data were better than the revenue data, and that is the most direct evidence on the constructive side. The CCB was €22,929 million at the end of the second quarter, up 26% at constant currencies and slightly faster than the 25% of the first quarter, with the first-time inclusion of Reltio contributing less than 1 percentage point[27]; Cloud ERP Suite revenue rose 27% at constant currencies, still above the 24% for cloud revenue overall[3]. On the second-quarter call management said that CCB growth is again outpacing cloud revenue growth, a reversal of 2025, that pipeline coverage after the Sapphire conference is higher than a year earlier, and that 90% of the 50 largest deals in the quarter included AI and Business Data Cloud[36].

A second reading is equally valid, because orders and near-term revenue do not map one to one. The transmission chain runs as follows: installed-base customers sign RISE with SAP and new customers sign SAP GROW, the contracts enter the CCB, they are recognized as cloud revenue over the subscription term roughly one to four quarters later, and they then produce cloud gross profit. But the CCB counts only the next 12 months, so large deals with back-loaded ramps separate signed value from near-term revenue, and the annual report disclosed that such deals and legally required termination-for-convenience clauses reduced 2025 CCB growth by about 1 percentage point[21]; the second half accounts for the largest share of annual bookings and management itself describes visibility as limited[15], the full-year outlook rests on the assumption of a near-term de-escalation of the conflict in the Middle East[4], and second-quarter CCB growth already includes an acquisition.

What to watch in the third quarter is which part of the implied range cloud revenue growth falls in and whether order growth holds at 25%. The specific readings are constant-currency cloud revenue growth relative to the range of about 20% to 24% with a midpoint near 22%, whether constant-currency CCB growth at the end of September is still at least 25% and whether the company discloses the acquisition contribution to it, whether Cloud ERP Suite keeps growing faster than cloud revenue overall, and whether the company maintains its full-year cloud revenue outlook of €25.8 billion to €26.2 billion and its wording that CCB growth will "slightly decelerate." Three observable outcomes would falsify the constructive reading: a prolonged Middle East conflict leads customers to postpone large migration decisions and CCB growth falls below 25%; large deals ramp revenue later, CCB and cloud revenue growth decline together, and the premise for faster total revenue growth in 2027 fails; or reported growth is sustained by consolidating Reltio, Dremio and Prior Labs while organic growth runs below the reported figure.

Customers who move to the cloud stop paying maintenance. Does SAP's third-quarter cloud growth still outrun that faster-shrinking legacy revenue?

This debate matters because not all of SAP's cloud growth is net growth: each installed-base customer that migrates ends one annual maintenance payment. Software support still produced €10,525 million in 2025 and is the company's second-largest revenue source and its highest-margin line[1], and the company explicitly says the constant-currency rate of decline will accelerate in the coming years[4]. The full-year outlook for cloud and software revenue is growth of 12% to 13% at constant currencies, the first half delivered 13%[7], and the implied second half needs only about 10% to 13%; if maintenance falls faster than anticipated while the cloud increase slows, this net figure would show the problem first.

Through the second quarter, the cloud increase remained far larger than the decline in legacy revenue. Second-quarter cloud revenue rose €1,151 million year over year, software support and licenses together fell €265 million, the net increase was €885 million, coverage was about 4.3 times, and cloud and software revenue grew 13% at constant currencies[3]; the constant-currency decline in software support was 6% in the first quarter[6] and 7% in the second, and license revenue fell 32% in the second quarter. On the regulatory side, the European Commission had been investigating SAP's on-premise maintenance and support practices, the company said in March that it did not anticipate a material impact on its future financial performance[37], and on July 9 the Commission concluded the investigation through a commitment decision[26].

A faster decline in maintenance can be good news or bad news, and this line alone cannot tell the two apart. It may show that migration is speeding up, but management also acknowledged on the call that the EU decision gives customers more flexibility over on-premise maintenance spending and could lead a small number of them to extend their time on legacy ECC systems rather than migrate to cloud ERP, an effect the company considers manageable[38]. The financial transmission is that when an installed-base customer moves to the cloud, its annual maintenance ends and a new cloud subscription begins, so the net increase in cloud and software revenue equals the cloud increase minus the decline in support and licenses; because software support carries a high gross margin, the faster it fades, the smaller the profit that comes with the same net revenue increase, which is why this line has to be read together with Cloud ERP Suite growth.

What to watch in the third quarter is whether the maintenance decline steps up sharply and whether net growth stays within the range the outlook implies. The specific readings are whether the constant-currency decline in software support exceeds the 7% of the second quarter and whether it jumps to 9% or more, whether constant-currency cloud and software revenue growth is at least about 11.4%, how the coverage of the support and license decline by the cloud increase changes from about 4.3 times in the second quarter, and whether the company changes how it describes the effect of the EU commitment decision. The falsifying outcomes are that maintenance attrition speeds up while the cloud increase slows and cloud and software revenue growth falls below 10%; that customers stay longer on ECC after the EU decision and Cloud ERP Suite growth declines; or that high-margin maintenance is replaced by lower-margin cloud subscriptions, so revenue grows on a net basis but the profit increase shrinks.

SAP is stepping up AI spending and has just bought three companies. Can third-quarter profit growth get back to the pace its full-year guidance requires?

This debate matters because for two years the investment case for SAP was double-digit revenue growth with slower expense growth, and the second quarter produced the first reading that ran the other way. In 2025 the IFRS operating margin rose 12.5 percentage points to 26.1% and free cash flow climbed from €4,222 million to €8,239 million[23]; in the second quarter of 2026 total revenue rose 9%, research and development rose 14%, cost of cloud rose 25%, non-IFRS operating profit grew only 9% at constant currencies, and the margin fell year over year[8]. In July the company then lowered its full-year non-IFRS operating profit outlook by €100 million because the Dremio and Prior Labs acquisitions are projected to dilute profit by more than €100 million, and the full-year range of 13% to 17% growth now has to be reached through second-half growth of about 10% to 18%[4].

The company explains the second-quarter slowdown in profit growth as a combination of temporary factors. The quarterly statement gives four causes: the sequential deceleration of cloud and total revenue growth, unusually low share-based compensation in the first quarter (it was €135 million lower year over year in that quarter, which lifted first-quarter profit growth), accelerated research and development investment, and the dilution from Reltio[27]; Reltio contributed about €25 million of revenue in the second quarter and about −€8 million to non-IFRS operating profit[39]. On the call management said that the lower cloud gross margin and the higher research and development share were one-time investment ahead of the third-quarter launch of the AI platform, that the framework of total expenses growing at about 90% of revenue growth is unchanged, that AI tools have raised developer productivity by about 30% on average, and that it does not need to build infrastructure on the scale of the cloud transition[9].

The opposite reading is that these investments may not be one-time. The transmission chain normally runs from total revenue growth, through expense growth below revenue growth, to an expanding non-IFRS operating margin and then to operating and free cash flow, and in the second quarter the chain reversed, with the non-IFRS operating margin down 0.7 percentage points year over year. Research and development headcount was 1,135 higher than a year earlier and total headcount reached 112,019[11]; outcome-based revenue from AI products is not yet disclosed separately; and management chose to absorb the acquisition dilution within the guidance range rather than raise the organic outlook[9], while saying that the three acquisitions will create a triple-digit million euro headwind to non-IFRS operating profit in the second half[38], which indicates that it prefers to keep its profit room for investment.

What to watch in the third quarter is whether profit growth returns to the range the second half requires and whether expense growth drops back below revenue growth. The specific readings are constant-currency non-IFRS operating profit growth relative to the range of about 10% to 18% with a midpoint near 14%, whether total operating expense growth is again below total revenue growth and whether research and development growth is still in double digits, whether the non-IFRS cloud gross margin stops falling from 74.6%, the year-over-year change in share-based compensation and profit growth excluding it, free cash flow relative to the €3,002 million of the second quarter, and whether the full-year outlook of €11.8 billion to €12.2 billion of operating profit and about €10 billion of free cash flow is maintained. The falsifying outcomes are that AI investment and acquisition integration prove not to be one-time, expense growth stays at or above revenue growth and the profit outlook is lowered again; that cost of cloud keeps growing faster than cloud revenue and the period of cloud gross margin expansion ends; or that a rebound in the share price raises share-based compensation, adds to the acquisition dilution, and third-quarter profit growth falls below 10%.

Risks and Falsifiers

Currency will reduce the figures SAP reports at actual exchange rates, but it can be checked separately from operating variance. About 40% of revenue comes from the Americas and the outlook is given at constant currencies; the company estimates that, at June 30 rates, full-year 2026 cloud revenue growth will be about 1.5 percentage points lower and non-IFRS operating profit growth about 2.0 percentage points lower[4], while the free cash flow outlook is given at actual currencies and is directly exposed, and from 2027 the company will also exclude foreign currency-related effects from its non-IFRS results, which reduces comparability across periods[40]. If the gap between constant-currency and actual growth in the third quarter is broadly in line with the company's +1.5, +1.0 and 0.0 percentage points, currency is not the source of any variance in the quarter.

Agentic AI could reduce SAP's applications to a back-end system of record and so weaken its subscription pricing power[34]. The exposure is cloud revenue, which is more than 60% of total revenue and still growing above 20%, together with the company's plan to move pricing from seats to outcomes, and there is currently no separately disclosed AI revenue against which to test it. The concern would weaken if CCB growth stays above 25%, Cloud ERP Suite grows faster than cloud revenue overall, and the company begins to disclose verifiable revenue or signing data for AI products.

If the conflict in the Middle East continues or escalates, customers may postpone large decisions such as an ERP migration. The full-year outlook assumes a near-term de-escalation and the second half accounts for the largest share of annual bookings, so the exposure is the full-year cloud revenue outlook of €25.8 billion to €26.2 billion and the subsequent growth of the €22,929 million CCB, and 2025 cloud revenue already landed toward the lower end of that year's guidance range[21]. If constant-currency CCB growth in the third quarter is at least 25% and the company maintains its full-year cloud revenue outlook, this risk did not materialize in the quarter.

The European Commission's commitment decision gives customers more flexibility over on-premise maintenance spending, and the effect could run in two directions[38]. Some customers may cut maintenance spending and others may stay on legacy ECC and delay their move to the cloud, so the exposure is the €10,525 million of 2025 software support revenue and the Cloud ERP Suite growth that depends on installed-base migration. The current understanding holds if the constant-currency decline in software support is no more than 8% in the third quarter, Cloud ERP Suite grows at least 25% at constant currencies, and the company keeps describing the impact as not material.

Competitors and hyperscalers will contest ERP and process-automation budgets during the customer migration window. Installed-base customers may fail to renew or may move to another vendor, so the exposure is cloud revenue growth and the renewal portion of the CCB, and the annual report groups price pressure, loss of market share and failure to achieve the planned margin increase as one set of risks[33]. If CCB growth stays above 25% and Cloud ERP Suite keeps growing faster than cloud revenue overall, share loss has not appeared in the numbers.

Investment in the AI platform, sovereign cloud infrastructure and the three acquisitions may last longer than the "one-time" period management describes. The exposure is the 2026 non-IFRS operating profit outlook of €11.8 billion to €12.2 billion and the 2027 framework of total expenses growing at 80% to 90% of total revenue growth[4]. If total operating expense growth in the third quarter is below total revenue growth and constant-currency non-IFRS operating profit growth is at least about 14%, the "one-time" description gains its first data support; expense growth that stays at or above revenue growth would weaken it.

What to Watch Next

• Cloud revenue growth (backlog-to-revenue debate): the baseline is 24% at constant currencies in the second quarter of 2026 after 27% in the first. Watch where growth lands within the implied second-half range of about 20% to 24%; a result near or above the midpoint of about 22% confirms the constructive reading, while a result near 20% with CCB slowing at the same time weakens it.
• CCB growth and acquisition contribution (backlog-to-revenue debate): the baseline is 26% at constant currencies at June 30, 2026, with Reltio contributing less than 1 percentage point. Growth of at least 25% at the end of September with the full-year cloud revenue outlook maintained is confirmation; a drop below 25% is falsification.
• Cloud ERP Suite growth (backlog-to-revenue debate): the baseline is 27% at constant currencies in the second quarter. Growth below cloud revenue overall would signal weaker migration momentum.
• Software support decline (maintenance run-off debate): the baseline is −7% at constant currencies in the second quarter after −6% in the first. A decline of no more than 8% with Cloud ERP Suite growth of at least 25% is confirmation; a jump to 9% or more is the warning sign.
• Net increase and growth in cloud and software revenue (maintenance run-off debate): the baseline is a net increase of €885 million, 13% constant-currency growth and coverage of about 4.3 times in the second quarter. Watch whether growth is at least about 11.4%; growth below 10% is falsification.
• Non-IFRS operating profit growth (AI investment debate): the baseline is 9% at constant currencies in the second quarter and 16% in the first half. Watch for a return to about 10% to 18% with a midpoint near 14%; at least about 14% with expense growth below revenue growth is confirmation, and less than 10% is falsification.
• Expense growth versus revenue growth and the cloud gross margin (AI investment debate): the baseline is expenses up 10% against revenue up 9% in the second quarter and a non-IFRS cloud gross margin of 74.6%. If cost of cloud keeps growing faster than cloud revenue, the margin expansion period has ended.
• Free cash flow and the full-year outlook (AI investment debate): the baseline is €3,002 million in the second quarter and €6,250 million in the first half. Watch whether the outlook of about €10 billion of free cash flow and €11.8 billion to €12.2 billion of operating profit is maintained; another reduction to either weakens the current understanding.

Conclusion

SAP's business is driven by installed-base customers moving to the cloud, and its current financial position is steady revenue, strong orders and lagging profit growth. In the second quarter of 2026 cloud revenue rose 24% and the CCB rose 26% at constant currencies, the year-over-year cloud increase was about 4.3 times the decline in maintenance and licenses, and free cash flow was €3,002 million, up 27%[3]; but in the same quarter research and development rose 14%, cost of cloud rose 25%, non-IFRS operating profit grew only 9% at constant currencies, and acquisition dilution lowered the full-year profit outlook by €100 million[4]. The central unresolved relationship therefore has two stages: whether order growth becomes cloud revenue growth within one to four quarters, and whether revenue growth can again outpace expense growth.

The two independent assessments published after the second-quarter results both place the near-term tension in profit rather than orders, with different emphases. Shreya Majumder of Zacks argues that the longer-term story still rests on cloud ERP migration, AI adoption and cash generation and that the €22.9 billion cloud backlog makes future cloud revenue more visible than a traditional license model, but that the lowered profit outlook narrows the room for positive earnings surprises, that Dremio and Prior Labs bring near-term dilution rather than margin relief, and that with legacy revenue declining and total revenue acceleration pushed to 2027 the outcome depends on execution[41]. boerse-global frames the disagreement as "is this a temporary integration headache, or the start of structurally lower margins?", says the metric to watch is the pace at which SAP converts AI integration costs into profitable growth, and cites JPMorgan analyst Toby Ogg's warning that margins could face sustained pressure if AI investments do not translate quickly into revenue growth[42]. The two agree that the backlog provides revenue visibility, and both speak to the debate over profit delivery during the AI investment period; they differ in that Zacks also notes that revenue acceleration has been pushed back, which touches the backlog-to-revenue debate, while boerse-global treats the third-quarter report as the test that separates a one-off adjustment from a longer margin squeeze. These are outside interpretations, not facts, and they are not a vote.

The combination of later observations decides whether the current understanding strengthens or weakens. If third-quarter constant-currency cloud revenue growth lands at about 22% or higher, CCB growth is at least 25%, the software support decline is no more than 8%, total operating expense growth drops back below total revenue growth, constant-currency non-IFRS operating profit growth is at least about 14%, and the company maintains its outlook of €11.8 billion to €12.2 billion of operating profit and about €10 billion of free cash flow, the reading that orders are driving revenue and the investment is one-time would strengthen materially. Conversely, if cloud revenue growth falls toward 20% while CCB growth slows with it, the maintenance decline jumps to 9% or more, expense growth stays at or above revenue growth, or the profit outlook is lowered again, the current understanding would be materially weakened.

Sources

[1] SAP 20-F filed 2026-02-26 · FY2025 revenue by type · 2026-02-26 · 20-F · https://www.sec.gov/Archives/edgar/data/1000184/000110465926020058/

[2] Drillr earnings calendar · SAP earnings call scheduled 2026-10-21 (calendar last updated 2026-09-20); TipRanks lists the same date for 2026 (Q3) · 2026-09-20 · earnings calendar

[3] SAP 6-K filed 2026-07-28 · 2Q26 group results at a glance · 2026-07-28 · 6-K · https://www.sec.gov/Archives/edgar/data/0001000184/000110465926087251/tm2621275d1_ex99-1.htm

[4] SAP 6-K filed 2026-07-28 · updated 2026 outlook and 3Q26 currency impact · 2026-07-28 · 6-K · https://www.sec.gov/Archives/edgar/data/0001000184/000110465926087251/tm2621275d1_ex99-1.htm

[5] MarketScreener SAP SE finances page (accessed 2026-09-20) · 3Q26 quarterly estimates · 2026-09-20 · MarketScreener · https://www.marketscreener.com/quote/stock/SAP-SE-436555/finances/

[6] SAP 6-K filed 2026-04-28 · 1Q26 group results at a glance · 2026-04-28 · 6-K · https://www.sap.com/docs/download/investors/2026/sap-2026-q1-statement.pdf

[7] SAP 6-K filed 2026-07-28 · 1H26 non-IFRS revenue and profit reconciliation · 2026-07-28 · 6-K · https://www.sec.gov/Archives/edgar/data/0001000184/000110465926087251/tm2621275d1_ex99-1.htm

[8] SAP 6-K filed 2026-07-28 · 2Q26 consolidated income statement · 2026-07-28 · 6-K · https://www.sec.gov/Archives/edgar/data/0001000184/000110465926087251/tm2621275d1_ex99-1.htm

[9] SAP 2Q26 earnings call 2026-07-23 (Drillr call summary) · margin and AI investment Q&A · 2026-07-23 · earnings-call · https://www.sap.com/investors/en/financial-documents-and-events/recent-results.html

[10] SAP 20-F filed 2026-02-26 · overview of SAP · 2026-02-26 · 20-F · https://www.sec.gov/Archives/edgar/data/1000184/000110465926020058/

[11] SAP 6-K filed 2026-07-28 · employees by region and function · 2026-07-28 · 6-K · https://www.sec.gov/Archives/edgar/data/0001000184/000110465926087251/tm2621275d1_ex99-1.htm

[12] SAP 20-F filed 2026-02-26 · RISE with SAP and SAP GROW journeys · 2026-02-26 · 20-F · https://www.sec.gov/Archives/edgar/data/1000184/000110465926020058/

[13] SAP 6-K filed 2026-07-28 · statement of financial position at 2026-06-30 · 2026-07-28 · 6-K · https://www.sec.gov/Archives/edgar/data/0001000184/000110465926087251/tm2621275d1_ex99-1.htm

[14] SAP 20-F filed 2026-02-26 · cloud operations and hyperscaler risk factor · 2026-02-26 · 20-F · https://www.sec.gov/Archives/edgar/data/1000184/000110465926020058/

[15] SAP 1Q26 earnings call 2026-04-23 (Drillr call summary) · guidance commentary · 2026-04-23 · earnings-call · https://www.sap.com/investors/en/financial-documents-and-events/recent-results.html

[16] SAP 20-F filed 2026-02-26 · two reportable segments · 2026-02-26 · 20-F · https://www.sec.gov/Archives/edgar/data/1000184/000110465926020058/

[17] SAP 20-F filed 2026-02-26 · ATS segment FY2025 results · 2026-02-26 · 20-F · https://www.sec.gov/Archives/edgar/data/1000184/000110465926020058/

[18] SAP 6-K filed 2026-07-28 · 2Q26 revenue by region · 2026-07-28 · 6-K · https://www.sec.gov/Archives/edgar/data/0001000184/000110465926087251/tm2621275d1_ex99-1.htm

[19] SAP 20-F filed 2026-02-26 · FY2024 versus FY2023 revenue · 2026-02-26 · 20-F · https://www.sec.gov/Archives/edgar/data/1000184/000110465926020058/

[20] SAP 20-F filed 2026-02-26 · FY2025 total revenue and revenue reconciliation · 2026-02-26 · 20-F · https://www.sec.gov/Archives/edgar/data/1000184/000110465926020058/

[21] SAP 20-F filed 2026-02-26 · FY2025 performance against outlook · 2026-02-26 · 20-F · https://www.sec.gov/Archives/edgar/data/1000184/000110465926020058/

[22] SAP 20-F filed 2026-02-26 · FY2025 operating profit and operating margin · 2026-02-26 · 20-F · https://www.sec.gov/Archives/edgar/data/1000184/000110465926020058/

[23] SAP 20-F filed 2026-02-26 · FY2025 cash flow analysis · 2026-02-26 · 20-F · https://www.sec.gov/Archives/edgar/data/1000184/000110465926020058/

[24] SAP 6-K filed 2026-07-28 · 2Q26 non-IFRS profit reconciliation · 2026-07-28 · 6-K · https://www.sec.gov/Archives/edgar/data/0001000184/000110465926087251/tm2621275d1_ex99-1.htm

[25] SAP 6-K filed 2026-07-28 · 1H26 group results at a glance · 2026-07-28 · 6-K · https://www.sec.gov/Archives/edgar/data/0001000184/000110465926087251/tm2621275d1_ex99-1.htm

[26] SAP 6-K filed 2026-07-28 · acquisitions, Eurobond and EC commitment decision · 2026-07-28 · 6-K · https://www.sec.gov/Archives/edgar/data/0001000184/000110465926087251/tm2621275d1_ex99-1.htm

[27] SAP 6-K filed 2026-07-28 · 2Q26 supplementary information and buyback · 2026-07-28 · 6-K · https://www.sec.gov/Archives/edgar/data/0001000184/000110465926087251/tm2621275d1_ex99-1.htm

[28] SAP 6-K filed 2026-07-28 · 1H26 statement of cash flows · 2026-07-28 · 6-K · https://www.sec.gov/Archives/edgar/data/0001000184/000110465926087251/tm2621275d1_ex99-1.htm

[29] SAP 20-F filed 2026-02-26 · definition of current cloud backlog · 2026-02-26 · 20-F · https://www.sec.gov/Archives/edgar/data/1000184/000110465926020058/

[30] SAP 6-K filed 2026-07-28 · share-based payment expenses · 2026-07-28 · 6-K · https://www.sec.gov/Archives/edgar/data/0001000184/000110465926087251/tm2621275d1_ex99-1.htm

[31] SAP 6-K filed 2026-07-28 · 1H26 free cash flow reconciliation and non-IFRS estimates · 2026-07-28 · 6-K · https://www.sec.gov/Archives/edgar/data/0001000184/000110465926087251/tm2621275d1_ex99-1.htm

[32] SAP 6-K filed 2026-04-28 · 1Q26 quarter-specific effects · 2026-04-28 · 6-K · https://www.sap.com/docs/download/investors/2026/sap-2026-q1-statement.pdf

[33] SAP 20-F filed 2026-02-26 · market share and profit risk factor · 2026-02-26 · 20-F · https://www.sec.gov/Archives/edgar/data/1000184/000110465926020058/

[34] SAP 20-F filed 2026-02-26 · AI-First, Suite-First strategy · 2026-02-26 · 20-F · https://www.sec.gov/Archives/edgar/data/1000184/000110465926020058/

[35] SAP 6-K filed 2026-04-28 · 2026 outlook as of April · 2026-04-28 · 6-K · https://www.sap.com/docs/download/investors/2026/sap-2026-q1-statement.pdf

[36] SAP 2Q26 earnings call 2026-07-23 (Drillr call summary) · pipeline, backlog and guidance · 2026-07-23 · earnings-call · https://www.sap.com/investors/en/financial-documents-and-events/recent-results.html

[37] SAP 6-K filed 2026-03-06 · European Commission proceedings on on-premise maintenance · 2026-03-06 · 6-K · https://www.sap.com/docs/download/investors/2025/sap-2025-integrated-report.pdf

[38] SAP 2Q26 earnings call 2026-07-23 (Drillr call summary) · risks · 2026-07-23 · earnings-call · https://www.sap.com/investors/en/financial-documents-and-events/recent-results.html

[39] SAP 6-K filed 2026-07-28 · Reltio acquisition and 2Q26 contribution · 2026-07-28 · 6-K · https://www.sec.gov/Archives/edgar/data/0001000184/000110465926087251/tm2621275d1_ex99-1.htm

[40] SAP 6-K filed 2026-07-28 · 2027 reporting changes · 2026-07-28 · 6-K · https://www.sec.gov/Archives/edgar/data/0001000184/000110465926087251/tm2621275d1_ex99-1.htm

[41] Zacks Investment Research via Yahoo Finance 2026-07-28 · Is SAP Stock a Buy After the 2026 Selloff and Profit Outlook Cut? · 2026-07-28 · Zacks Investment Research · https://finance.yahoo.com/markets/stocks/articles/sap-stock-buy-2026-selloff-154100641.html

[42] boerse-global.de via ad-hoc-news.de 2026-07-30 · SAP’s AI Shopping Spree Clouds the Profit Picture Even as Cloud Orders Hit €22.9 Billion · 2026-07-30 · boerse-global.de · https://www.ad-hoc-news.de/boerse/news/unternehmensnachrichten/sap-s-ai-shopping-spree-clouds-the-profit-picture-even-as-cloud-orders/69899420