SAP Q2 2018: Cloud revenue shows momentum, 600 more S/4 customers

SAP’s second-quarter results show cloud revenue now at one-fifth of total, indicating momentum. S/4 Hana customers now number 8,900

SAP has announced almost €6bn in second-quarter 2018 revenue, of which €1.213bn was for cloud subscription and support, or 20% of the total.

The total of €5.999bn compares with €5.782bn top-line revenue in the same quarter last year, an increase of nearly 4%. Last year’s quarter-on-quarter figure was effectively flat compared with the same period in 2016.

Cloud revenue was up 30% compared with last year’s second quarter, and is four percentage points higher as a proportion of overall revenue – up from 16% to 20%. New cloud bookings were reported to be up by 29%.

The increase in cloud revenues has boosted SAP’s profits. Operating profit for the quarter was just over €1bn, up 13% on the equivalent period last year. Profit after tax was up 8% to €720m.

The supplier signed up a further 600 customers for S/4 Hana, its flagship enterprise resource planning (ERP) system in the quarter. The customer base for that core product is now 8,900 customers, up 41% on Q2 2017.

At its Sapphire customer conference in June, SAP announced a new C/4 Hana suite of customer relationship management (CRM) products, including the software-as-a-service technology it gained through its April acquisition of Callidus Software.

Deutsche Telekom and beauty products company Coty were “among those that chose SAP’s C/4Hana solutions this quarter”, the company reported. Total revenue for C/4 Hana was €242m.

SAP Leonardo, which is the label the supplier gives to its blockchain, internet of things and artificial intelligence endeavours, was reported to have been adopted by Porsche in the quarter.

SAP CEO Bill McDermott said in the statement accompanying the release of the quarterly figures: “The fourth generation of enterprise applications has taken another major step forward with C/4Hana. Together with S/4Hana, SAP customers are finally able to focus their entire business on delivering a personalised experience to their customers. The intelligent enterprise is the elixir to bridge silos inside fractured businesses and beyond, so CEOs get a single view of the customer.”

At Sapphire, McDermott said SAP would dominate the CRM market in years to come, ousting, by implication, current leader Salesforce.

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And chief financial officer Luka Mucic said: “This quarter is exemplary for the road we have chosen – rapidly transforming the company to the cloud while substantially growing profits and margins. I am very confident that this momentum will continue to expand. That is why we raised our 2018 outlook and 2020 ambition.”

SAP said it now expects 2020 non-IFRS cloud subscriptions and support revenue to be in a range of €8.2bn to €8.7bn. Previously, this was stated as €8bn to €8.5bn.

The supplier said it had a “strong double-digit software revenue growth in the UK”, with cloud and software revenue increasing by 10%.

In the Americas, cloud and software revenue decreased by 3%, while cloud subscriptions and support revenue rose by 24%.

In the Asia-Pacific and Japan region, cloud and software revenue was up by 4%, while cloud subscriptions and support revenue grew by 42%.

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