SAP Raises Sales and Profit

SAP reported sales that topped estimates and raised its outlook for the year, as more customers signed up for its flagship S/4 Hana business software, according to Bloomberg.

Sales for the third quarter rose 8 percent to 5.4 billion euros ($5.9 billion), SAP reported. That compares with the average 5.3 billion-euro estimate of analysts’ projections compiled by Bloomberg.  Operating profit was 1.64 billion euros, just slightly below the 1.65 billion euro average estimate. SAP said it added more than 400 S/4 Hana customers during the quarter and now has 4,100 businesses running the suite, up from 3,700 at the end of June. Shares were up 1.7 percent to 81 euros at 9:27 a.m. in Frankfurt.

Adjusted operating profit for the year will be 6.5 billion euros to 6.7 billion euros compared with the previous range of of 6.4 billion euros to 6.7 billion euros at constant currencies.  Cloud and software revenue to climb 6.5 percent to 8.5 percent this year, adding half a percentage point at both ends of the range.

Revenue in Europe, the Middle East and Africa grew 5 percent to 2.32 billion euros, boosted by Germany, where SAP gets about a third of the region’s sales. U.S. revenue grew 7 percent to 1.77 billion euros, while sales in the Asia, Pacific and Japan region was 825 million euros. Cloud subscriptions and support revenue in the quarter totaled 769 million euros, compared with the 787 million euro average predicted by analysts.

New software license revenue, an important predictor of earnings potential from support contracts, was 1.03 billion euros. Operating margin on an adjusted basis was 30.5 percent of sales, compared with the 31.8 percent average estimate. After swallowing Ariba, Concur and SuccessFactors for $15 billion in acquisitions between 2012 and 2014, SAP has been relatively quiet in the business software arms race. In the same period, Oracle made a $9.3 billion offer for NetSuite Inc. and Salesforce.com Inc. bought Demandware Inc. for $2.8 billion.