SAP Q3 2022: revenue up 15%, Ukraine war impact €250m

SAP has announced its third-quarter 2022 financial results, which show a 15% increase in revenue to €7.841bn year on year, with cloud revenue up by 38% to €3.288bn, 42% of the total.

The supplier’s Q1 cloud, as opposed to on-premise, revenue percentage was 40% and in Q2 it was 41%.

SAP CEO Christian Klein said: “Our cloud solutions are the answer, as customers turn to us to help them future-proof their businesses. This trust in SAP is reflected in our accelerating cloud momentum. With a recurring revenue share of more than 80%, it’s clear that our transformation has reached an important inflection point, paving the way for continued growth in the future.”

The supplier’s CFO, Luka Mucic, added: “We have delivered a strong cloud quarter with accelerating momentum across all key cloud indicators. We’re at an important inflection point in our transformation, which we anticipate will lead to accelerating revenue growth and double-digit operating profit growth in 2023.”

The impact of the war in Ukraine was estimated as €250m for the year, restated from €300m in the previous two quarters. SAP decided to end its business operations in Russia and Belarus in March 2022, following Russia’s invasion of Ukraine in February 2022.

The revenue impact will come from a “lack of new business and discontinuation of existing business”, according to the results statement.

The Reuters news agency has reported that SAP will fail to hit its deadline to leave Russia because it has not found a buyer for the supplier’s business in the country.

Reuters reporters say their sources have confirmed that although SAP has “shut its datacentres and cloud business in the country, it still has annual contracts for its maintenance business in Russia that it must service or face legal risks”.

They also cite an SAP spokesperson as saying that the company had “significantly reduced” its workforce in Russia from 1,250 and would have fewer than 100 staff in the country by the end of 2022.

The Rise with SAP service, which packages managed cloud infrastructure and managed services into one contract, and delivers the supplier’s S/4 Hana enterprise resource planning (ERP) system over the cloud, has been at the forefront of SAP’s messaging over the past 22 months.

In the results statement, it highlighted what it considers to be highlights in the adoption of Rise. Customers who chose the “business transformation as a service” included the Center for Pandemic Vaccines and Therapeutics at the Paul-EhrlichInstitut, Dabur India, Nikon, Prada and Schneider.

Other customers that are reported to having gone live on S/4 in the cloud in the third quarter include BioNTech, Bosch BASF Smart Farming, Dufry International, Petrobras and Wipro.

The supplier chose to highlight the introduction of new “talent development” modules for SAP Success Factor’s Human Experience Management (HXM) suite. It described these as “the most significant developments that SuccessFactors has had in the last decade”.

The results statement noted that SAP announced, in the quarter, that it has acquired Askdata, a startup firm focused on search-driven analytics. The acquisition of this firm will, according to the statement, strengthen SAP’s “ability to help organisations take better-informed decisions by leveraging AI-driven natural language searches”.

The SAP board also announced in the quarter that it has appointed Dominik Asam, from Airbus, as CFO. He will start in March 2023 and will succeed Mucic, who has spent just over a quarter of a century at SAP, serving as the supplier’s third CFO in its history since 2013.