SAP, the German business-software company, has regained its position as Europe’s most valuable technology group after gaining approximately $26 billion in market value, the Wall Street Journal reports.
This surge follows the company’s announcement of increased revenue and earnings forecasts for the year, fueled by strong demand for artificial intelligence (AI) solutions.
In European morning trading, SAP’s shares rose by more than 5%, contributing over 24 billion euros (around $25.96 billion) to its market valuation, which now stands at about 273.10 billion euros. In contrast, ASML Holding’s market value has dropped to 264.37 billion euros after the Dutch semiconductor equipment maker warned that the recovery in certain areas of the industry may take longer than expected, leading to a loss of more than $60 billion in market value earlier in the week.
SAP’s impressive growth can be attributed to a significant increase in sales from its cloud business, alongside raised guidance for cloud and software revenue, operating profit, and free cash flow for the year. Chief Executive Christian Klein highlighted that many cloud deals in the recent quarter incorporated AI use cases. The company has intensified its focus on leveraging AI technology, forming new partnerships and expanding existing collaborations to strengthen its competitive position.
The momentum for AI advancements has sparked substantial investments from tech firms as they position themselves in a rapidly evolving market that is expected to transform business operations and employment landscapes. Last year, SAP invested in three generative AI companies—Aleph Alpha, Anthropic, and Cohere—and appointed Walter Sun from Microsoft as its global head of AI.
In its latest report, SAP indicated that its cloud business performed exceptionally well in several markets, including Brazil, Chile, Germany, Italy, India, Japan, and Spain, with robust results also reported in China, Saudi Arabia, and the United States.
For the third quarter, SAP reported a 10% increase in total revenue at constant currencies, amounting to 8.47 billion euros, while its core cloud revenue surged 27% to 4.35 billion euros. Operating profit rose by 28% to 2.24 billion euros. Analysts had projected total revenue of 8.44 billion euros, cloud revenue of 4.35 billion euros, and an operating profit of 2.07 billion euros, based on a non-IFRS consensus provided by the company.
Looking ahead, SAP has raised its expectations for non-IFRS operating profit at constant currencies to between 7.8 billion and 8 billion euros, up from the previous forecast of 7.6 billion to 7.9 billion euros. The company anticipates cloud and software revenue to range between 29.5 billion and 29.8 billion euros, exceeding earlier estimates of 29 billion to 29.5 billion euros. Additionally, free cash flow is projected to be between 3.5 billion and 4 billion euros, higher than the prior estimate of approximately 3.5 billion euros.
