SAP raises guidance as cloud transformation gathers pace

FRANKFURT (Reuters) – Germany’s SAP said that its cloud revenues grew by 41 percent in the third quarter as its business transformation gathers pace, enabling management to raise guidance for revenues and profits this year.

FILE PHOTO: The logo of German software group SAP is pictured at its headquarters in Walldorf, Germany, May 12, 2016. REUTERS/Ralph Orlowski/File Photo

SAP, Europe’s most valuable tech company, said it now expects revenues to grow by 7.5 to 8.5 percent in 2018 and operating profits by 9.5 to 11 percent, its confidence buoyed by a strong order pipeline for the final quarter.

“The future has never been brighter at SAP – we’re fired up and ready to go,” CEO Bill McDermott told journalists on a conference call, claiming the mantle for SAP as the world’s top cloud enterprise software company by users.

SAP is ramping up sales and installations of its cloud-based S/4HANA business suite, which is superseding its mainstay Business Suite enterprise software that is sold under license and runs at on-site servers.

New cloud bookings, an order entry metric, rose by 37 percent in the third quarter at constant currencies. That underpinned SAP’s upward revision in its forecast for 2018 cloud revenues to 36.5 to 39 percent from 34 to 38 percent previously.

SAP is best known for running the inner workings of companies – finance, administration and logistics – but has made a push into front-office sales and marketing with its new C/4HANA suite that was announced in June.

McDermott said the marketing suite was achieving growth rates of 200 percent. “It’s incredible. We are growing in steep triple digits and winning in net new (business) and replacements,” he said.

SAP’s third-quarter non-IFRS revenues grew by 10 percent at constant currencies, ahead of market expectations. Non-IFRS operating profit growth of 11 percent was less than expected. At the bottom line, earnings per share of 1.14 euros beat the mean view in a Reuters poll of analysts.

($1 = 0.8699 euros)

Reporting by Douglas Busvine; editing by Thomas Seythal

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