SAP SE Q4 FY2025 earnings call

• 2025 Performance: Achieved outlook, overachieved operating profit and cash flow. Q4 was the best bookings quarter with lower churn and stable discounts.
• Transformation: Started transformation 5 years ago, with RISE and GROW initiatives lifting customers to cloud and helping transform. Mid-market became the fastest-growing customer segment.
• AI and Business Data Cloud: Business Data Cloud had over EUR 2 billion in order entry since launch. AI embedded in apps, using LLMs with structured and unstructured data, knowledge graph, and BDC for data harmonization.
• Product Strategy: Clarity in product strategy with PDP as integration platform, BTM portfolio for business transformation, new innovations in sustainability and business network.
• Geopolitical Observations: Talent and regulation challenges, need for digital union harmonization to address layered regulations affecting deal closing and customer decisions.

Cloud and Software: In 2025, cloud revenue grew 26%, with cloud ERP suite up 32% (accounting for 86% of total cloud revenue). Software licenses revenue decreased by 27%. Total revenue for the full year approached EUR 37 billion, up 11%. Non-IFRS cloud gross margin expanded by 1.6 percentage points to 75%. Mid-market: The fastest-growing market within the customer base, with several thousand net new customers. Public vs Private Cloud: Public cloud business grew 5x faster than private cloud.

• 2026 outlook: Expect CCB growth to moderate slightly but less than 2025. Total revenue growth to accelerate. Operating profit outlook reflects sustained discipline. Expect record free cash flow of approx. EUR 10 billion in 2026. New 2-year share repurchase program of up to EUR 10 billion starting Feb 2026.
• Continued emphasis on disciplined cash management and returning capital to shareholders.

• Geopolitical Tensions: Impact on deal ramps, longer negotiation and deployment times for sovereign solutions, affecting commercial customers in sensitive geographies/industries.
• Regulatory Challenges: Layered regulations in Europe vs clear frameworks in US, affecting deal closing and customer decisions.

Q: Question related to US regulation and sovereignty A: Christian Klein responded on US public sector performance and regulatory standards, stating the US public sector was a top performer in Q4 with clear regulatory frameworks.

Q: Question on share price drop and market understanding A: Christian and Dominik discussed strategy, AI leadership, and SaaS/PaaS growth, noting SAP's strong SaaS/PaaS growth rates compared to competitors despite current market perception Q: Question on tariffs and impact A: Christian Klein stated no direct tariff impact on software/services, indirect impact seen in public sector but Q4 US public sector was strong Q: Question on M&A and share buyback A: Christian Klein mentioned share buybacks support employees and financial flexibility, M&A considered for tech/AI when right opportunity arises Q: Question on CCB and cloud backlog A: Dominik Asam explained factors like large deals with longer ramps, geopolitical procurement laws, and customer preference for sovereign solutions affecting current cloud backlog Q: Question on AI in industry-specific processes A: Christian Klein discussed leveraging core ERP data, co-innovating with customers, and extensibility of AI agents Q: Question on AI value and sales measurement A: Christian Klein highlighted real-world AI implementations with customers and measuring AI through deal value proposition and product roadmap alignment