SAP Raises 2018 Outlook as Cloud Sales Growth Outpaces Bookings

SAP is betting big on its cloud business for future sales growth, raising its outlook even as concerns remain about whether new bookings can keep pace, according to Bloomberg.

The German software giant raised its guidance both for this year and for 2020, citing accelerating cloud sales. New cloud bookings, a keenly watched metric because it indicates future revenue growth, increased 29 percent, slower than 40 percent sales growth in the segment.

CEO Bill McDermott is looking to expand SAP’s cloud-based services to challenge rivals. SAP this year made its biggest acquisition in more than three years when it bought Callidus Software for about $2.4 billion, gaining access to new sales analytics and customer engagement tools. Europe’s biggest technology company expects cloud subscriptions to account for about 29 percent of total revenue by 2020, up from around 16 percent in 2017.

The company now expects non-IFRS cloud subscriptions and support revenue of as much as 5.2 billion euros this year, up from a previous maximum expectation of 5.15 billion euros. It also increased its 2020 ambition for cloud subscriptions and support revenue by 200 million euros to as much as 8.7 billion euros.

“This update reflects the strong momentum in SAP’s cloud business, the acquisition of Callidus Software as well as a more challenging currency environment compared to 2017,“ the company said in a statement.