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12 May 2022
What happened at SAPPHIRE? Its ''private''
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What happened at SAPPHIRE? Its ''private''
SAP SE (SAP:ETR) | 0 0 0.0%
- Published:
12 May 2022 -
Author:
Slowinski Stefan SS | Castillo-Bernaus Ben BC -
Pages:
14
Cloud clicking on all cylinders
We attended SAP SAPPHIRE this week in Orlando, including yesterday''s Financial Analyst meeting, and spoke at length with management, customers and partners. SAP outlined its successful execution on product integration, high customer NPS, SAP RISE driving S/4HANA Cloud upgrades (with large customers, like Accenture, mainly opting for the Private Cloud version but with a plan to migrate modularly to Public Cloud), and success in cross selling the suite of apps, including increased competitive wins vs Oracle in ERP, Workday in HCM (Seagate swap and Amazon being targeted now) and Coupa in Procurement. Signavio featured prominently as a crucial component of business transformation (vs Celonis'' limited capabilities), and success with smaller innovative companies was also highlighted as 60% of S/4HANA customers are now net new. Microsoft is clearly emerging as the clear #1 IaaS partner, ahead of Amazon Web Services (which is strong in the mid-market) and Google Cloud Platform (still lagging).
2025 guidance confirmed, with more interim detail provided
SAP expects Cloud revenue growth acceleration this year and next, and suggested total revenues should grow double digits in 2024, and possibly as early as 2023 (well ahead of consensus expectations). Operating profit should grow double digits in 2023, with cash flows growing slightly slower. SAP suggests it is ahead of plan on its 2025 EUR22bn Cloud revenue target, and its EUR11.5bn op inc target, although Cloud GMs may be 1-2% below the 80% target due to the outperformance of Private Cloud offerings. Overall, operating profit is expected to grow at a 13% CAGR from 2022-2025, with regular buybacks also likely. Ongoing 2.5 / 1 maintenance to Cloud conversion should help drive ongoing high levels of revenues growth beyond 2025.
Defensive positioning near term with catalysts medium term
SAP''s enterprise positioning (low churn), high recurring revenues and FX tailwind make...