SAP Q1 2022: Revenue up 11%, Ukraine war impact projected to be €300m

SAP has announced first-quarter revenue of more than €7.1bn, and the Ukraine war is projected to have a €300m impact for 2022

SAP has announced €7.077bn in first-quarter revenue, up 11% on 2021. Cloud revenue was €2.820bn, up 31%, and nearly 40% of the supplier’s overall sales.

The war in Ukraine has had a negative impact on the supplier’s revenue. The impact is projected to amount to €300m for the year.

Its CEO, Christian Klein, put out a statement on 2 March, Standing in solidarity, which expressed support for western government economic sanctions against the Russian Federation, and announced a battery of humanitarian aid efforts, including the opening up of SAP offices as shelter for refugees. The statement also announced the stoppage of operations in Russia, and was updated, on 9 March, with an announcement of the suspension of sales in Russia and its ally Belarus.

In the quarterly statement, the company said: “In the first quarter, SAP’s business was impacted by the war in Ukraine. At the beginning of March, SAP stopped all new sales in Russia and Belarus. In addition, SAP started to shut down its cloud operations and intends to stop the support and maintenance of its on-premise products in Russia.

“Current cloud backlog was lowered by approximately €60m due to the termination of existing cloud engagements, and operating profit by approximately €70m due to reduced on-premise revenues.”

SAP expects “a total negative revenue impact of approximately €300m from lack of new business and discontinuation of existing business, in particular software and support and services”.

This is the second year of the supplier’s Rise with SAP service, launched at the end of January 2021. Rise has been billed as a “business transformation” service. It bundles managed cloud infrastructure and managed services into one contract, and it delivers the ERP system S/4 Hana, based on the in-memory, columnar Hana database, over the cloud – variously and mostly AWS, Google Cloud Platform and Microsoft Azure.

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Rise has been at the forefront of the supplier’s messaging over the past 15 months, and in the results statement, it highlighted customer adoption.

Accenture, Canon Production Printing, Daimler Truck AG, Grupo Estrella Blanca, NEC Corporation and Wipro Limited were among the international customers cited as Rise adoptees.

In the UK, logistics company Unipart has recently joined a roster that also includes Twinings OvaltineBriggs of Burton, a process engineering company; Inchcape, a London-based automotive sector company; EG Group, a petrol station and food retailer; and Asda.

SAP also noted in its statement that Microsoft has announced it will become the first public cloud provider to adopt Rise with SAP and SAP S/4Hana to transform its own SAP ERP deployment.

SAP’s flagship ERP system, S/4Hana, launched in February 2015, attracted 500 customers in the quarter, taking total adoption to more than 19,300 customers, up 18% year over year. 13,900 are live, some 72% of the total contracted.

Cloud revenue

S/4 cloud revenue was confirmed at €404m, up 78% on the same year-ago quarter.

“Customers powered another quarter of strong cloud growth as they turned to us for solutions to make their businesses more sustainable, their supply chains more resilient and their enterprises more future-proof,” said Klein.

“Our signature ERP offering, SAP S/4Hana, grew at record levels, demonstrating the confidence customers place in us to support their business transformations.”

And Luka Mucic, chief financial officer, said: “We are off to a solid start to the year and our outlook remains strong. Despite the current macroeconomic environment, cloud revenue growth accelerated further, fuelling total revenue growth. Current cloud backlog grew at a healthy rate and continues to support our confidence in our long-term plans and outlook for the year.”

Also noted in the statement is a partnership, announced on 22 March, between the supplier and strategy consultancy BCG, oriented towards sustainability. This, it is said, will “help companies transform their business models, become sustainable enterprises and gain the data transparency they need to embed sustainability into their core business”. This activity is in a pilot phase, with an expected broader launch in the third quarter of 2022.

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