Berlin, Germany – An update on the business and stock of SAP, a leading software corporation, shows promising growth momentum and solid performance in the second quarter of 2024. The company is poised to sustain its premium valuation as demand remains robust, supported by strong cloud revenue and increasing adoption of artificial intelligence (AI). The positive outlook is further reinforced by improving margins and a successful restructuring exercise that is nearing completion.

SAP’s recent earnings report for the second quarter of 2024 revealed a 10% revenue growth on a constant currency basis, reaching EUR8.3 billion. The solid performance was driven by a 25% growth in cloud revenue and accelerated growth in cloud ERP Suite. Despite a decline in license revenue, the company saw significant EBIT level beats, surpassing consensus expectations.

The growth momentum for SAP is attributed to the success of its S/4 product cycle, as reflected in the strong cloud backlog growth trend. Sales pipeline indicators remain favorable, with no immediate impact from macroeconomic uncertainties. The company’s strategic focus on AI adoption is also proving beneficial, with premium AI features included in a growing number of deals.

Efforts to restructure the business are yielding positive results, as evidenced by the improvement in EBIT margin from the previous year. As SAP approaches the final stages of its restructuring program, the company is expected to see margin expansion in the coming years. These developments contribute to a positive outlook for SAP’s valuation and earnings growth.

Looking ahead, SAP’s target price is projected to reach EUR309 based on optimistic growth estimates fueled by cloud revenue momentum and AI adoption. The solid performance in the second quarter of 2024 aligns with bullish views on SAP’s future prospects and valuation. Despite potential risks, including delays in cloud revenue growth and product development, the overall outlook for SAP remains positive.

In conclusion, SAP’s strong performance in the second quarter of 2024, coupled with ongoing growth momentum and strategic initiatives, supports a buy rating for the company. With a focus on cloud adoption, AI integration, and margin expansion, SAP is well-positioned to maintain its competitive edge and justify its premium valuation in the market.