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SAP Q3 2016 results: cloud revenue reaches 14% of total

SAP’s third quarter 2016 financial results show 28% growth in cloud revenue, and the addition of 400 customers for its flagship S/4 Hana product

SAP’s third quarter 2016 results have disclosed a 28% year-over-year increase in cloud revenue from €600m to €769m.

Cloud subscriptions and support revenue represented 14% of SAP’s €5.37bn total revenue for the third quarter, compared with 12% of the total in the same quarter in 2015.

While this might seem a modest increase, the supplier revealed new cloud bookings were up by 24% from €265m in the third quarter 2015, reaching €265m this year. Speaking to Computer Weekly one year ago, SAP’s president of Europe, the Middle East and Africa (Emea), Franck Cohen, said to focus on cloud revenue as a proportion of overall revenue was “not a good way to look at our cloud business. If you look at cloud bookings, you see the traction in the market”.

In September 2016, SAP rival Oracle announced first quarter 2016-17 cloud revenue of $969m, which represents 11% of its total quarterly revenue of $8.6bn, up from 7% of total revenue in the same quarter the previous year.

SAP’s operating profit was down by 9%, from €1.2bn to €1.1bn. The supplier said this reflected “an increase in stock-based compensation expense following the strong appreciation of SAP’s share price in the third quarter”.

In the Emea region, the company declared a 6% increase in cloud and software revenue. Cloud subscriptions and support revenue, specifically, grew by 34%. The supplier said it had seen double-digit software licences revenue growth in Germany, France, the UK and South Africa.

SAP signed up over 400 customers for its flagship full business suite on its in-memory columnar database platform, S/4Hana, in the quarter. It said some 40% of these were “net new” customers. In the same quarter in 2015, it also stated it had secured 400 customers for S/4Hana.

SAP also drew attention to growth in its Hana Cloud Platform product, which is a platform-as-a-service offering that it is positing as an internet of things (IoT) play. It said that using the platform, “customers like Trenitalia, Italy’s largest train company, are connecting transportation vehicles and tools to revolutionise asset management with real-time insights from sensors”.

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SuccessFactors Employee Central, the core of the supplier’s human capital management product suite, was acquired in 2011. It exceeded 1,350 at the end of the quarter.

The supplier’s “customer engagement and commerce” business, based partly on technology acquired with Hybris in 2013, evinced “high double-digit year-over-year customer growth in the third quarter”, said SAP.

Cloud subscriptions and support revenue in the SAP Business Network segment, based partly on the Ariba acquisition of 2012, was up by 17%. The supplier stated that 2.4 million companies trade over $840bn on the Ariba network, and more than 44 million users process travel and expenses with its 2014 acquisition, Concur. It added that its customers had managed over 2.8 million “flexible” workers in approximately 130 countries, with the Fieldglass platform, acquired in 2014, over the past 12 years.

In the Americas, cloud and software revenue went up by 9%, and cloud subscriptions and support revenue rose by 24%.

The S/4Hana innovation cycle is the fastest in our history and is catalysing the performance of all SAP cloud solutions
Bill McDermott, SAP

The company reported double-digit growth in software licences revenue in Brazil and Mexico, and stated cloud and software revenue was up by 13% in Asia-Pacific.

“The S/4Hana innovation cycle is the fastest in our history and is catalysing the performance of all SAP cloud solutions,” said SAP CEO Bill McDermott.

“We demonstrated continued momentum and strong execution in the third quarter,” added chief financial officer Luka Mucic. “We are tracking to the upper end of all outlook metrics set at the beginning of the year. Paired with a robust pipeline, this gives us the confidence that we will deliver yet another strong fourth quarter.”

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