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SAP Q2 2015 results: Cloud revenue grows as portion of overall sales

SAP’s second-quarter 2015 results show 5% growth in cloud revenue as a proportion of overall revenue. Emea triple-digit cloud booking growth in Q2 2015, above expectations

SAP’s financial results for the second quarter of 2015 indicate a 5% growth in cloud revenue as a proportion of overall revenue, up from 6% in the second quarter of 2014 to 11% in the equivalent quarter of 2015.

Overall revenue for the quarter was €4.97bn, of which €555m was cloud.

Franck Cohen, president for Europe, the Middle-East and Africa (Emea) at SAP, said of his region: “We had almost triple-digit growth in cloud bookings in the second quarter, which was above our expectations. And there is a lot of interest in S/4 Hana. We have doubled the number of customers using that. It’s been a quite good quarter.”

The S/4 Hana enterprise resource planning system the supplier launched in February of this year has, said Cohen, been bought by ArcelorMittal in France, Bayer in Germany and Associated British Ports in the UK.

SAP said, in a statement, that there are now more than 7,200 customers for its in-memory data platform, Hana, compared with 3,600 a year ago. It reported more than 900 S/4 Hana customers by the end of the second quarter, compared with some 370 at the end of the previous quarter.

In this results release, the supplier broke out the figure for its SAP Business Network, which includes acquired technology from Ariba, Concur and Fieldglass. Total revenue in this segment was €400m in the second quarter, a year-over-year increase of 194%.

“These were all US companies,” said Cohen, “with the vast majority of their revenue in the US. What is nice is that we are seeing transactions in the Emea region. Fieldglass and Concur revenue is above expectations here.”

Modest profitability

Total sales for the first half of the year were €9.5bn, with an operating profit of €2.4bn (26%). Operating profit for the first half of 2014 was €2.1bn of €7.8bn (27%).

Asked about modest profitability, Cohen said: “We have a restructuring programme with voluntary early retirement, so we have increased our provision for that. Moreover, the more cloud revenue we make, the more the margin deteriorates. 

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“No one is saying that the cloud revenue will have the same profitability as the on-premise revenue. The cloud revenue is going up significantly, so the overall profitability will be affected. But the more that we get into a management mode for the renewal rate, reducing sales and marketing, the more the profitability will improve.

“We are also putting in datacentres and localisation for our products, so we are in an investment mode for cloud growth. With regards to our competition, we are doing okay against the pure cloud players, which also have to invest to acquire market share.”

Asked how SAP is planning to mitigate the risk attendant on the Greece crisis, Cohen said since Greece is only 2% of European GDP it is a negligible factor. “If the Eurozone suffers overall then it may have some indirect impact. But it is contained, and does not affect our numbers. Spain and Italy are already in recovery mode, so I don’t think they are anywhere near to Greece,” he said.

In the Emea region, there was a 10% increase in non-IFRS cloud and software revenue. Cloud subscriptions and support revenue grew by 94%, with triple-digit growth in new cloud bookings.

The Americas region had non-IFRS cloud and software revenue growth of 36%, and cloud subscriptions and support revenue in the region grew by 141%, with new cloud bookings nearly tripling.

SAP CEO Bill McDermott said in a statement: “When I speak with CEOs, they are looking for a roadmap to digitise their business and to create new business models. Our business is thriving because we have the most complete vision for how to make this transition to digital business a simple one.”

SAP chief financial officer Luka Mucic added: “Our second-quarter growth in new cloud bookings was significantly higher than in the first quarter. This momentum showed across our entire cloud and business network portfolio.”

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