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German software giant SAP report fourth quarter earnings on Tuesday. Last quarter cloud related sales were up 37% and $SAP gave robust guidance as it takes on cloud giants Amazon (AWS) and Microsoft however global economy risks have increased since.

SAP Cloud

SAP SE NYSE: SAP Earnings Missed Before Open Tuesday

€1.78 EPS Forecast on Revenue estimate of €8.28 billion

Earnings

SAP reports Q4 earnings with expectations of €1.78 EPS forecast with a revenue estimate of €8.28 billion. Analysts will commentary on SAP’s acquisition of Qualtrics for $8 billion in cash in Q4.

Qualtrics specializes in providing Software-as-a-Service (SaaS) based experience management (“XM”) software. The company is anticipated to strengthen its foothold in the customer relationship management market against peers including salesforce.com CRM, Oracle ORCL, among others. With Qualtrics buyout, SAP is anticipated to bolster Customer Experience segment revenues further. This segment’s revenues surged 54% at cc to €232 million in the last-reported quarter. The Callidus buyout which was concluded in April, 2018, contributed €52 million to revenues in the third quarter.

SAP has also bumped up it's Io T Domain presence with the recent addition of multiple Internet of Things (IoT) solutions to the SAP Leonardo digital innovation system which could drive the company’s top line in the future, particularly with the margin strain in the cloud segment.

SAP also saw new deals with KIO Networks, Delivery Hero SE, iLoLay, Singapore Airlines ("SIA") and others.

SAP SE NYSE: SAP

Market Reaction: 

Highlights

SAP Q3 Earnings Recap

€1.74 Billion Missed Forecast €1.8bn BUT €6.031 billion Beat Revenue estimate of 6.97 billion

Earnings

Operating profit came in 11% higher at €1.74 billion but missed estimates lower than the €1.8bn average estimate. But it raised its outlook for non-IFRS operating profit this year by €25m to as much as €7.525bn.as profit margins grew 10% to 29.4%,  still was less than forecasts. Total revenues, on non-IFRS basis, were €6.031 billion up 8% year over year (up 10% at constant currency), ahead of the consensus estimate of $6.97 billion. On IFRS basis, revenues were €6.02 billion up 8% year over year.

SAP SE NYSE: SAP

Market Reaction> $107.01 USD −$8.86 (-7.65%) Oct 18, 4:02 PM EDT

Highlights

  • New cloud bookings grew 37% on a constant currency basis, and now sees full-year cloud computing bookings rising between 36.5% and 39%, up from a previous forecast of 34% to 38%, while operating earnings grow by around 9.5% to 11%.
  • Software licensing and support revenue,, still the largest portion of SAP's sales, rose 2% from last year to €3.702 billion
  • SAP said, a figure that was essentially flat from the second quarter total. "As promised SAP's business is growing its resilience with a constantly increasing share of more predictable revenue. All of this makes me confident that we will deliver on our raised 2018 outlook and 2020 ambition," said CFO Luca Mucic.
  • SAP’s flagship S/4 Hana software added customers in the July-September period to reach more than 9 500 total users, up from around 8 900 at the end of June.
  • SAP this year made its biggest acquisition in more than three years when it bought Callidus Software for about $2.4bn, gaining access to new sales analytics and customer engagement tools.
  • The C/4 Hana platform that deploys these tools saw triple-digit growth in the quarter, winning clients including Giorgio Armani and Colgate-Palmolive.

Outlook

SAP boosted both its full year profit guidance and cloud computing sales estimates,  CEO Bill McDermott said the company's future has "never been brighter: we're fired up and ready to go".

"SAP is the fastest growing cloud company at scale in the enterprise software applications industry. Our growth drivers are firing on all cylinders, especially SAP C/4HANA and SAP S/4HANA as foundations of the Intelligent Enterprise. With a stronger than ever Q4 pipeline, we confidently raise our full year guidance." McDermott said 

The company now expects non-IFRS cloud subscriptions and support revenue of as much as €5.25bn this year, up from a previous maximum expectation of €5.2bn.

Source: SAP 

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