SAP (SAP) Q2 Earnings: Cloud Backlog Surges +26% Despite EPS Miss
Key Takeaways
- SAP missed Wall Street estimates: Non-IFRS (non-International Financial Reporting Standards) adjusted earnings per American Depositary Receipt came in at $1.82, below the $2.03 consensus, while revenue of $11.28 billion fell short of the $11.44 billion forecast.
- Cloud momentum remained exceptional: Cloud revenue rose 24% at constant currencies to €6.28 billion, and current cloud backlog jumped 26% at constant currencies to nearly €22.9 billion, accelerating from the first quarter.
- Full-year operating profit guidance trimmed: Non-IFRS operating profit outlook was narrowed to €11.8–€12.2 billion, down from €11.9–€12.3 billion, reflecting the dilutive impact of the Dremio and Prior Labs acquisitions.
- AI adoption accelerated across large deals: Management reported that artificial intelligence and SAP Business Data Cloud were embedded in more than 90% of the company's 50 largest deals during the quarter.
- Free cash flow generation remained robust: SAP delivered €3.0 billion in free cash flow for the quarter, underscoring strong cash generation even as investment in research and development (R&D) ramped up.
Why These Results Matter
SAP's second-quarter results arrived at a pivotal moment for the German enterprise software giant. The company is navigating a multiyear transformation from traditional on-premise software licensing toward a cloud-first, AI-enabled subscription model, a shift that carries significant implications for revenue mix, profitability, and long-term valuation. With legacy software license revenue declining 32% year over year and the company's core support for on-premise systems set to end in 2027, investors are sharply focused on whether cloud growth can offset the structural decline in traditional revenue streams. The Q2 print provided a mixed picture: cloud demand indicators were undeniably strong, but profitability fell short of expectations as AI-related investment spending and acquisition costs weighed on the bottom line. To get a broader sense of how SAP stacks up against peers, I also checked this using Tickeron’s AI Screener.
Breaking Down the Q2 Numbers
SAP reported total revenue of €9.88 billion ($11.28 billion) for the second quarter ended June 30, 2026, representing a 9% increase on a reported basis and 11% growth at constant currencies. Cloud revenue was the standout performer, climbing 22% as reported and 24% at constant currencies to €6.28 billion, slightly above the company-compiled consensus of €6.26 billion. Within the cloud segment, Cloud ERP (Enterprise Resource Planning) Suite revenue rose 25%, or 27% at constant currencies, and now accounts for 88% of total cloud revenue.
On the profitability side, IFRS operating profit increased 8% to €2.64 billion, while non-IFRS operating profit grew 7% as reported, or 9% at constant currencies, to €2.74 billion. IFRS earnings per share climbed 30% to €1.89, and non-IFRS earnings per share rose 6% to €1.59. However, when converted to U.S. dollars for American Depositary Receipts, adjusted EPS of $1.82 missed the $2.03 analyst consensus by $0.21, and revenue of $11.28 billion fell $160 million short of the $11.44 billion estimate. Software license revenue declined 32% to €131 million, while software support revenue fell 8% to €2.44 billion, reflecting the ongoing structural shift away from traditional on-premise business. I also ran a quick scan with Tickeron’s AI tools to cross-check the cloud metrics against recent industry trends.
How the Market Reacted
SAP shares fell 1.79% during regular trading on July 23, closing at $146.09, as the headline EPS and revenue miss weighed on initial sentiment. However, the stock staged a notable recovery in after-hours trading, rising as much as 5–6% at various points as investors digested the stronger-than-expected cloud backlog figure and the reassurance that the profit guidance reduction stemmed from acquisition accounting rather than operating weakness. The bifurcated reaction highlights a key tension in the market's assessment of SAP: near-term earnings misses are being weighed against a powerful cloud demand narrative that suggests durable revenue growth ahead. Shares remain down roughly 48% over the past twelve months, reflecting broader software sector pressure and concerns about AI-driven disruption, making each earnings release a critical sentiment check.
Looking Ahead: Guidance and Key Factors to Monitor
SAP maintained its full-year 2026 cloud revenue guidance of €25.8 billion to €26.2 billion at constant currencies, representing 23% to 25% growth, and kept its cloud and software revenue target of €36.3 billion to €36.8 billion unchanged. Free cash flow guidance of approximately €10 billion was also reaffirmed. The sole adjustment came from non-IFRS operating profit, where the range was lowered by €0.1 billion at both ends to reflect the dilutive impact from the completed acquisitions of Dremio and Prior Labs, which management estimated would weigh on second-half operating profit by a low triple-digit million euro amount.
Several factors deserve close attention moving forward. First, the trajectory of current cloud backlog growth will be a leading indicator of future cloud revenue — management noted that backlog growth now exceeds cloud revenue growth, a reversal of the prior pattern and a bullish signal for the quarters ahead. Second, the pace of AI monetization will come under increasing scrutiny as SAP rolls out its autonomous enterprise strategy, including plans for dozens of AI assistants and more than 400 autonomous suite agents by year-end.
Investors should also monitor margin trends as R&D spending accelerates and acquisition integration costs flow through the income statement. Macroeconomic uncertainty and geopolitical tensions, particularly in the Middle East, remain wild cards that could influence enterprise spending decisions. Finally, the ongoing decline in software support revenue is expected to accelerate as the 2027 end-of-mainstream-maintenance deadline for legacy on-premise systems approaches, potentially compressing overall revenue growth rates even as cloud revenue continues to expand. From what I see, the cloud backlog acceleration stands out as the most important forward-looking detail here.
My Experience Using Tickeron’s AI Screener
When I want to put earnings data like this into a wider context, I often turn to Tickeron’s AI Screener. It lets me filter stocks and ETFs by industry, market cap, technical indicators, and AI-driven signals, which helps surface comparable names or spot patterns across the software sector without spending hours on manual screens. The tool has become a regular part of how I review quarterly reports and identify other opportunities that align with the themes I’m already tracking in names like SAP.
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Financial writer and active order flow futures trader with a focus on fundamental analysis, macroeconomic factors, and equity research. I make in-depth blogs on stocks and ETFs, bridging the gap between raw market data and real-world trading decisions.
SAP's Indicator enters downward trend
The Aroon Indicator for SAP entered a downward trend on October 05, 2026. Tickeron's A.I.dvisor identified a pattern where the AroonDown red line was above 70 while the AroonUp green line was below 30 for three straight days. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options. A.I.dvisor looked at 175 similar instances where the Aroon Indicator formed such a pattern. In 110 of the 175 cases the stock moved lower. This puts the odds of a downward move at 63%.
Technical Analysis (Indicators)
Bearish Trend Analysis
The 10-day RSI Indicator for SAP moved out of overbought territory on September 01, 2026. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 36 similar instances where the indicator moved out of overbought territory. In 16 of the 36 cases, the stock moved lower in the following days. This puts the odds of a move lower at 44%.
The Momentum Indicator moved below the 0 level on September 28, 2026. You may want to consider selling the stock, shorting the stock, or exploring put options on SAP as a result. In 50 of 87 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are 57%.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where SAP declined for three days, the price rose further in 50 of 62 cases within the following month. The odds of a continued downward trend are 54%.
Bullish Trend Analysis
The Stochastic Oscillator suggests the stock price trend may be in a reversal from a downward trend to an upward trend. 32 of 55 cases where SAP's Stochastic Oscillator exited the oversold zone resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are 58%.
The 50-day moving average for SAP moved above the 200-day moving average on September 17, 2026. This could be a long-term bullish signal for the stock as the stock shifts to an upward trend.
Following a +5.99% 3-day Advance, the price is estimated to grow further. Considering data from situations where SAP advanced for three days, in 179 of 322 cases, the price rose further within the following month. The odds of a continued upward trend are 56%.
Fundamental Analysis (Ratings)
The Tickeron Valuation Rating of 14 (best 1 - 100 worst) indicates that the company is seriously undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (4.746) is normal, around the industry mean (51.456). P/E Ratio (27.540) is within average values for comparable stocks, (82.636). Projected Growth (PEG Ratio) (1.610) is also within normal values, averaging (3.135). Dividend Yield (0.014) settles around the average of (0.011) among similar stocks. P/S Ratio (5.653) is also within normal values, averaging (69.875).
The Tickeron Price Growth Rating for this company is 43 (best 1 - 100 worst), indicating steady price growth. SAP’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron SMR rating for this company is 49 (best 1 - 100 worst), indicating strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Profit vs. Risk Rating rating for this company is 72 (best 1 - 100 worst), indicating that the returns do not compensate for the risks. SAP’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 94, placing this stock better than average.
The Tickeron PE Growth Rating for this company is 80 (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
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a provider of e-business software solutions
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