SAP has cut its full-year earnings forecast as the paradigm shift towards as-a-service continues.
The largest business-management software provider on the planet said that it expected operating profit to be somewhere in the region of €5.6bn - €5.8bn; this is down from earlier projections of €6bn.
SAP claims that the revised figures are simply a by-product of its subscription-based products, which will take time to begin generating strong results. Indeed, the Q3 results released today showed a 41% rise (€278m) in cloud revenue. However, earnings are taking a hit in the near-term as the software vendor looks to accelerate sales of cloud-based tools.
Luka Mucic, chief financial officer of SAP, said: “Our order entry for new business in the cloud was more than one third of the software license revenue in the third quarter, up significantly from a year ago. With this powerful shift we are raising the cloud outlook again while adjusting the operating income range to reflect less upfront and more ratable revenue.”
Third-quarter operating profit rose to €1.36bn, just shy of analyst’s expectations. Despite the rise, shareholders didn’t seem convinced with ‘subscription-based delays’ theory. Shares fell by 4.2% this afternoon, making it one of the worst performing companies in the DAX index.