SAP Drops in Frankfurt as Cloud Growth Disappoints Analysts

SAP shares fell today in early Frankfurt trading despite raising its sales forecast, as third-quarter revenue at Europe’s largest software company slightly missed analyst estimates, according to Bloomberg.

SAP fell as much as 2.9 percent, the steepest intraday loss since June, even as it raised its sales forecast for 2017 as more customers signed up for the company’s flagship S/4 Hana business software. Revenue in third quarter came in at 5.6 billion euros, slightly below consensus.

Analysts from Commerzbank and Morgan Stanley pointed to what they saw as weaker-than-expected subscriptions for its cloud business. “The negative was the cloud business,“ Adam Wood, an analyst at Morgan Stanley, wrote in a note to clients. While some of the sales were impacted by currency effects, a 19 percent increase in new cloud bookings is a "disappointing number,“ he said.

SAP is investing heavily in its cloud-based products and services to challenge sector leader Salesforce, and sees online software subscriptions outpacing new on-premise licenses by 2018. CEO Bill McDermott contested the analysts’ view, telling reporters in a call that SAP is "rocking the cloud,“ and pointed to strong new bookings in countries including China.

McDermott also managed to win new clients with a major update of SAP’s accounting, manufacturing and logistics software. S/4 Hana added 600 customers in the third quarter to reach more than 6,900 users, a greater intake than in the previous three-month period. The software allows businesses to run tasks on their own machines or in a cloud-computing arrangement hosted by SAP or one of its partners.

The company increased its full-year revenue target by 100 million euros to between 23.4 and 23.8 billion euros, citing momentum from S/4 Hana. The company also slightly raised the lower end of its operating profit outlook for the year, as well as a forecast for cloud and software revenue.

Operating profit, excluding share-based compensation, amortization and other charges, was 1.64 billion euros, missing the average estimate of 1.66 billion euros. Software license sales, a measure of revenue potential tied to traditional on-premise software was 3.72 billion euros.